UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended
February 29, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the Transition Period From
_______________ to _______________
Commission file number 0-17988
NEOGEN CORPORATION
(Exact name of Registrant as specified in its charter)
Michigan 38-2367843
(State or other jurisdiction of (I.R.S. Employer
corporation or organization) Identification No.)
620 Lesher Place
Lansing, Michigan 48912
(517) 372-9200
(Address of principal executive offices)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange
Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days. Yes X No
As of April 1, 2000, there were 5,838,000 outstanding shares of
Common Stock.
INDEX
NEOGEN CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Interim Financial Statements (unaudited)
Consolidated balance sheets - February 29, 2000 and May 31, 1999.
Consolidated statements of operations - Three months ended February
29, 2000 and 1999; nine months ended February 29, 2000 and 1999.
Consolidated statements of stockholders' equity - Nine months ended
February 29, 2000 and 1999.
Consolidated statements of cash flows - Nine months ended February
29, 2000 and 1999.
Notes to consolidated financial statements - February 29, 2000.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
2
PART I. FINANCIAL INFORMATION
ITEM 1. Interim Financial Statements
3
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
NEOGEN CORPORATION AND SUBSIDIARIES
February 29 May 31
2000 1999
----------- -----------
ASSETS
CURRENT ASSETS
Cash and equivalents $ 1,472,000 $ 1,063,000
Marketable securities 6,667,000 9,604,000
Accounts receivable 5,340,000 3,296,000
Inventories 5,193,000 4,361,000
Other current assets 579,000 960,000
----------- -----------
TOTAL CURRENT ASSETS 19,251,000 19,284,000
PROPERTY AND EQUIPMENT, net of
accumulated depreciation 2,767,000 2,148,000
INTANGIBLE AND OTHER ASSETS
Goodwill, net of accumulated amortization 3,894,000 3,200,000
Other assets, net of accumulated amortization 1,417,000 1,476,000
----------- -----------
$27,329,000 $26,108,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable and current maturities
of long-term notes payable $ 499,000 $ 49,000
Accounts payable 711,000 842,000
Other accrued liabilities 850,000 1,038,000
----------- -----------
TOTAL CURRENT LIABILITIES 2,060,000 1,929,000
LONG-TERM NOTES PAYABLE 89,000 125,000
OTHER LONG-TERM LIABILITIES 268,000 268,000
STOCKHOLDERS' EQUITY
Preferred stock:
Par value $1.00 per share, 100,000 shares
authorized, none issued
Common stock:
Par value $.16 per share, 20,000,000
shares authorized, 5,839,000 shares
issued at February 29, 2000; 5,929,000
shares issued at May 31, 1999 934,000 949,000
Additional paid in capital 21,604,000 22,236,000
Retained earnings 2,374,000 601,000
----------- -----------
24,912,000 23,786,000
----------- -----------
$27,329,000 $26,108,000
=========== ===========
See notes to consolidated financial statements
4
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
NEOGEN CORPORATION AND SUBSIDIARIES
Three Months Ended February 29 Nine Months Ended February 29
------------------------------ -----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
SALES $ 6,276,000 $ 5,291,000 $ 17,042,000 $ 16,928,000
COST OF GOODS SOLD 2,721,000 2,270,000 7,436,000 7,098,000
------------ ------------ ------------ ------------
GROSS MARGIN 3,555,000 3,021,000 9,606,000 9,830,000
EXPENSES
Sales and marketing 1,456,000 1,226,000 4,289,000 3,954,000
General and administrative 948,000 695,000 2,472,000 2,416,000
Research and development 427,000 383,000 1,185,000 1,205,000
------------ ------------ ------------ ------------
2,831,000 2,304,000 7,946,000 7,575,000
------------ ------------ ------------ ------------
OPERATING INCOME 724,000 717,000 1,660,000 2,255,000
Other Income (expense)
Interest income 144,000 128,000 424,000 379,000
Interest expense (3,000) (4,000) (9,000) (12,000)
Other 57,000 41,000 208,000 209,000
------------ ------------ ------------ ------------
198,000 165,000 623,000 576,000
------------ ------------ ------------ ------------
INCOME BEFORE TAX 922,000 882,000 2,283,000 2,831,000
Income tax 295,000 293,000 510,000 759,000
------------ ------------ ------------ ------------
NET INCOME $ 627,000 $ 589,000 $ 1,773,000 $ 2,072,000
============ ============ ============ ============
NET INCOME PER SHARE
Basic $ 0.11 $ 0.10 $ 0.30 $ 0.34
============ ============ ============ ============
Diluted $ 0.11 $ 0.10 $ 0.30 $ 0.33
============ ============ ============ ============
<FN>
See notes to consolidated financial statements.
</TABLE>
5
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
NEOGEN CORPORATION AND SUBSIDIARIES
Common Stock
---------------------------- Additional Retained-
Number Paid-In Earnings
of Shares Amount Capital (Deficit)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at June 1, 1999 5,929,000 $ 949,000 $ 22,236,000 $ 601,000
Exercise of options and warrants 65,000 10,000 275,000
Repurchase of shares (155,000) (25,000) (907,000)
Net income for the
nine months ended
February 29, 2000 1,773,000
------------ ------------ ------------ ------------
Balance at February 29, 2000 5,839,000 $ 934,000 $ 21,604,000 $ 2,374,000
============ ============ ============ ============
Balance at June 1, 1998 6,208,000 $ 993,000 $ 24,270,000 $ (1,653,000)
Exercise of options 36,000 6,000 85,000
Repurchase of shares (229,000) (37,000) (1,556,000)
Net income for the
nine months ended
February 28,1999 2,072,000
------------ ------------ ------------ ------------
Balance at February 28, 1999 6,015,000 $ 962,000 $ 22,799,000 $ 419,000
============ ============ ============ ============
<FN>
See notes to consolidated financial statements.
</TABLE>
6
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NEOGEN CORPORATION AND SUBSIDIARIES
Nine Months Ended February 29
-----------------------------
2000 1999
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,773,000 $ 2,072,000
Adjustments to reconcile net income to net cash
provided from (used in) operating activities:
Depreciation and amortization 668,000 668,000
Changes in operating assets and liabilities:
Accounts receivable (1,234,000) (455,000)
Inventories 92,000 (13,000)
Other current assets 441,000 (5,000)
Accounts payable (330,000) (90,000)
Other accrued liabilities (196,000) 22,000
------------ ------------
NET CASH PROVIDED FROM
OPERATING ACTIVITIES 1,214,000 2,199,000
INVESTING ACTIVITIES:
Purchases of property and equipment
and other assets (639,000) (661,000)
Purchases of marketable securities (22,291,000) (18,954,000)
Proceeds from sale of marketable securities 25,228,000 20,007,000
Acquisitions (2,420,000) (600,000)
------------ ------------
NET CASH USED IN
INVESTING ACTIVITIES (122,000) (208,000)
FINANCING ACTIVITIES:
Payments on long-term borrowings (36,000) (36,000)
Net payments for repurchase
of common stock (932,000) (1,593,000)
Net proceeds from issuance
of common stock 285,000 91,000
------------ ------------
NET CASH USED IN
FINANCING ACTIVITIES (683,000) (1,538,000)
------------ ------------
INCREASE IN CASH AND EQUIVALENTS 409,000 453,000
Cash and equivalents at beginning of period 1,063,000 720,000
------------ ------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 1,472,000 $ 1,173,000
============ ============
<FN>
See notes to consolidated financial statements.
</TABLE>
7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NEOGEN CORPORATION AND SUBSIDIARIES
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) considered necessary for a
fair presentation have been included. The results of operations for the nine
months ended February 29, 2000 are not necessarily indicative of the results
to be expected for the fiscal year ending May 31, 2000. For more complete
financial information, these consolidated financial statements should be read
in conjunction with the May 31, 1999 audited consolidated financial
statements and the notes thereto included in the Company's annual report on
Form 10-K for the year ended May 31, 1999.
NOTE B - INCOME PER SHARE
The following table presents the income per share calculations:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 29 February 29
------------------ -----------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator for Basic and Diluted
Income Per Share - Net Income $ 627,000 $ 589,000 $1,773,000 $2,072,000
========== ========== ========== ==========
Denominator
Denominator for basic income per share-
weighted average shares 5,913,000 6,052,000 5,919,000 6,145,000
Effect of Dilutive Securities -
stock options and warrants 8,000 41,000 19,000 42,000
---------- ---------- ---------- ----------
Denominator for diluted earnings
per share - adjusted weighted
average shares and assumed conversions 5,921,000 6,093,000 5,938,000 6,187,000
========== ========== ========== ==========
Basic Income Per Share $ 0.11 $ 0.10 $ 0.30 $ 0.34
========== ========== ========== ==========
Diluted Income Per Share $ 0.11 $ 0.10 $ 0.30 $ 0.33
========== ========== ========== ==========
</TABLE>
NOTE C - STOCK REPURCHASE
The Company's board of directors has authorized the purchase of up to 750,000
shares of the Company's common stock. As of March 31, 2000, the Company had
purchased 471,000 shares in negotiated and open market transactions. Shares
purchased under this buy-back program will be retired and used to satisfy
future issuance of common stock upon the exercise of outstanding stock
options and warrants.
NOTE D - INVENTORIES
Inventories are stated at the lower of cost, determined on the first-in,
first-out method, or market. The components of inventories are as follows:
February 29, 2000 May 31, 1999
----------------- ------------
Raw Material $2,896,000 $1,810,000
Work-In-Process 798,000 755,000
Finished Goods 1,499,000 1,796,000
---------- ----------
$5,193,000 $4,361,000
========== ==========
NOTE E - ACQUISITIONS
On February 17, 2000, Neogen Corporation purchased 100% of the common stock
of Acumedia Manufacturers, Inc., with principal offices in Baltimore,
Maryland. Acumedia, an internationally recognized producer of culture medias,
was a wholly owned subsidiary of IDEXX Laboratories, Inc.
Consideration for the sale, subject to certain post closing adjustments, was
$2,850,000, which included cash at the closing of $2,400,000 and a one year
7% promissory note of $450,000, and up to $1,000,000 additional payments
based on levels of post closing revenues.
Proforma financial information as if the acquisition of Acumedia had taken
place on June 1, 1998 follows:
Nine Months Ended
February 29, 2000 February 28, 1999
----------------- -----------------
Revenue $19,611,000 $24,987,000
Net Income 1,434,000 1,724,000
Diluted Income per Share .24 .28
In August 1998, the Company purchased certain inventory and technology from
BioPort Corporation of Lansing, Michigan. The purchase price consisted of a
single cash payment of $600,000.
9
NOTE F - SEGMENT INFORMATION
The Company has two reportable segments: Food Safety and Animal Safety. The
Food Safety segment produces and markets diagnostic test kits and related
products used by food producers and processors to detect harmful natural
toxins, drug residues, foodborne bacteria, food allergens, pesticide
residues, disease infections and levels of general sanitation. The Animal
Safety segment is primarily engaged in the production and marketing of
products dedicated to animal health, including 250 different veterinary
instruments and a complete line of consumable products marketed to
veterinarians and distributors serving the professional equine industry.
These segments are managed separately because they represent strategic
business units that offer different products and require different marketing
strategies. The Company evaluates performance based on total sales and
operating income of the respective segments.
Segment information for the three months ended February 29, 2000 and
February 28, 1999 follows:
<TABLE>
<CAPTION>
Food Animal Corporate &
Safety Safety Eliminations(1) Total
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2000
Net sales to external customers $ 2,855,000 $ 3,421,000 $ $ 6,276,000
Operating income 251,000 746,000 (273,000) 724,000
Total assets 10,006,000 10,675,000 6,648,000 27,329,000
----------- ----------- ---------- -----------
1999
Net sales to external customers $ 2,375,000 $ 2,916,000 $ 5,291,000
Operating income 432,000 422,000 $ (137,000) 717,000
Total assets 6,906,000 10,309,000 8,664,000 25,879,000
----------- ----------- ---------- -----------
Segment information for the nine months ended February 29, 2000 and
February 28, 1999 follows:
<CAPTION>
Food Animal Corporate &
Safety Safety Eliminations(1) Total
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2000
Net sales to external customers $ 8,391,000 $ 8,651,000 $ $17,042,000
Operating income 1,249,000 1,095,000 (684,000) 1,660,000
Total assets 10,006,000 10,675,000 6,648,000 27,329,000
----------- ----------- ---------- -----------
1999
Net sales to external customers $ 7,817,000 $ 9,111,000 $ $16,928,000
Operating income 1,429,000 1,383,000 (557,000) 2,255,000
Total assets 6,906,000 10,309,000 8,664,000 25,879,000
----------- ----------- ---------- -----------
<FN>
(1) Includes corporate assets, consisting of marketable securities, and
overhead expenses not allocated to specific business segments. Also
includes the elimination of intersegment transactions and minority
interests.
</TABLE>
10
NOTE G - SUBSEQUENT EVENT
On March 27, 2000, the Company reached settlement with Vicam L.P., Vicam
Management Corporation, and Jack L. Radlo ("Vicam") on all claims against
Vicam not previously settled. The agreement provides for an undisclosed
payment to the Company. The dollar amount of this settlement will be
reflected in the Company's financial statements in the quarter ended May 31,
2000.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The information in this Management's Discussion and Analysis of Financial
Condition and Results of Operations contains both historical financial
information and forward-looking statements. Neogen does not provide forecasts
of future financial performance. While management is optimistic about the
Company's long-term prospects, historical financial information may not be
indicative of future financial performance.
The words "anticipate", "believe", "potential", "expect" and similar
expressions used herein are intended to identify forward-looking statements.
Forward-looking statements involve certain risks and uncertainties. Various
factors, including competition, recruitment of and dependence on key
employees, impact of weather on agriculture and food production,
identification and integration of acquisitions, research and development
risks, patent and trade secret protection, government regulation and other
risks detailed from time to time in the Company's reports on file at the
Securities and Exchange Commission may cause actual results to differ
materially from those contained in the forward-looking statements.
Three Months Ended February 29, 2000 Compared to Three Months Ended
February 28, 1999.
Total sales for the quarter ended February 29, 2000 increased $985,000, or
19%, compared to the same quarter in the prior year. Sales of products
dedicated to food safety were up $480,000, or 20%, and sales of animal safety
products increased $505,000, or 17%.
The increase in food safety sales was influenced by several factors. Sales of
test kits to detect harmful bacteria such as E. coli O157:H7 and salmonella
continued their strong growth trend with sales up over $495,000 and sales of
products used for the detection of food allergens increased over $40,000.
Sales of diagnostic tests for the detection of mycotoxins declined $35,000.
These products are influenced by the uncertainty of weather conditions, which
impacts growing conditions differently each year. Accordingly, it is not
uncommon for the Company to experience significant year to year fluctuations
in sales of these kits to detect harmful mycotoxins.
The increase in sales of animal safety products is primarily due to increased
sales for three products. Sales of the Company's vaccine to prevent type B
botulism in horses increased $220,000, due to the return of availability
during the February 29, 2000 quarter. The Company awaited approval by USDA
during much of the second and third fiscal quarters. Conditional approvals
were received in January and February 2000. The Company is currently working
with USDA to devise testing protocols to reduce the chance for product
outages in the future. Additionally, sales increases were experienced with
the Company's equine respiratory pharmaceutical products (33%) and drug
detection products (20%). The respiratory products increases followed
promotions implemented during the quarter and the drug detection products
increases have arisen because of demand following renewed interest in
maintaining the integrity of horse racing.
11
Cost of goods sold increased $450,000. As a percentage of sales, cost of
goods sold increased from 42.9% to 43.4% due to the overall mix of product
sold.
Sales and marketing expenses increased $230,000 as a result of adding sales
and marketing personnel to expand sales activities both domestically and
internationally.
General and administrative expense increased principally due to legal fees
incurred in connection with the Vicam litigation (see Legal Proceedings).
Administrative salaries have increased following the addition of senior level
personnel to assist with managing the growth and strategic direction of the
Company.
The growth in research and development follows the Company's commitment to
the investment in future product development.
Other income increased $30,000 because of greater levels of invested funds.
Nine Months Ended February 29, 2000 Compared to Nine Months Ended
February 28, 1999.
Total sales for the nine months ended February 29, 2000 increased $115,000,
or .7%, compared to the same period of the prior year. Sales of products
dedicated to food safety were up $575,000, or 7%, and sales of animal safety
products declined $460,000, or 5%.
The increase in food safety sales was affected by a number of factors. Sales
of test kits to detect harmful bacteria such as E. coli O157:H7 and
salmonella continued their strong growth trend with sales up $1,230,000.
Sales of products used for the detection of food allergens also increased
over $100,000. The sales growth in these two areas offset sales declines in
two other areas. In the fourth quarter of last fiscal year, the Company sold
its human clinical product line. As a result, there were no human clinical
product sales in the first nine months this year compared to $460,000 in
sales of human clinical products during the same period last year. Sales of
diagnostic tests for the detection of mycotoxins declined $470,000 compared
to the prior year primarily as a result of decreased sales for aflatoxin and
vomitoxin test kits. It is not uncommon for the Company to experience
significant year to year fluctuations in sales of these kits.
The decline in sales of animal safety products is primarily due to lower
sales for two products. Sales of the Company's vaccine to prevent type B
botulism in horses declined $200,000, due exclusively to a shortage in
product availability. As discussed previously in this Form 10-Q, the Company
is currently working with USDA to prevent such shortages in the future.
Additionally, a customer for specialty needles used to introduce unique
marinades into meats is no longer purchasing product from the Company. Sales
of this product decreased $700,000 as a result of this change.
Cost of goods sold increased $340,000. As a percentage of sales, cost of
goods sold increased from 41.9% to 43.6% due to the overall mix of products
sold.
Sales and marketing expenses increased $335,000 as a result of adding sales
and marketing personnel to expand sales activities both domestically and
internationally.
The Company's effective tax rate was approximately 22% in the nine months
ended February 29, 2000 due to the availability of tax credit carryforwards,
which were used to offset federal income taxes.
12
Financial Condition and Liquidity
At February 29, 2000, the Company had $8,100,000 in cash and marketable
securities, working capital of $17,200,000 and stockholders' equity of
$24,900,000. In addition, the Company has unused bank lines of credit
totaling $10,000,000. Cash and marketable securities decreased $2,500,000
during the nine months ended February 29, 2000, with $1,200,000 of cash
generated by operations offset by the purchase of Acumedia and stock
repurchases.
At February 29, 2000, the Company had no material commitments for capital
expenditures. Inflation and changing prices are not expected to have a
material effect on the Company's operations.
Although cash and marketable securities are generally considered adequate,
management believes that these resources may not be sufficient to meet the
Company's cash requirements to commercialize products currently under
development or its plans to acquire additional technology and products that
fit within the Company's mission statement. Accordingly, the Company may be
required to issue equity securities or enter into other financing
arrangements for a portion of its future capital needs.
13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In November 1998, the Company won a jury trial lawsuit in the U.S. District
Court for Western District of Michigan against Arthur J. Trickey and Arthur
M. Trickey. This litigation involved a dispute over the ownership of a
trademark used in connection with the Company's equine care products. The
defendants have appealed this jury verdict to the U.S. Court of Appeals for
the Sixth Circuit Court on an in pro per basis.
In January 2000, the Company prevailed, on summary judgment, the patent
infringement issues against Vicam, L.P., Vicam Management Corporation and
Jack L. Radlo ("Vicam") filed in the U.S. District Court for the Middle
District of Florida. The Court ruled that the Company did not infringe the
intellectual property rights of Vicam, and dismissed Vicam's counterclaim for
infringement. On March 27, 2000, the jury trial commenced on the Company's
tort claims for money damages. The Company maintained that it had sustained
significant lost sales as a result of Vicam's publication of the false
allegation that a particular Neogen product (the AC-5 product) infringed two
patents licensed to Vicam. On the second day of trial, the Company's
remaining claims were settled when Vicam agreed to pay the Company an
undisclosed sum and to forego any appeals of the Court's previous rulings in
the Company's favor on the infringement issues. This settlement amount also
covered the Company's claims in a related lawsuit it filed last year in
Michigan against Vicam for defamation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of the Company was held on October 7, 1999. The matters
voted upon and the results of the vote follow:
1) Election of Directors
FOR
---
Herbert D. Doan 5,639,501
James L. Herbert 5,640,675
G. Bruce Papesh 5,638,975
Gordon E. Guyer 5,639,675
Robert M. Book 5,637,975
Leonard E. Heller 5,640,675
Jack C. Parnell 5,638,975
Thomas H. Reed 5,638,975
Lon M. Bohannon 5,640,675
2) To amend the Company's Articles of Incorporation and by-laws to
provide (i) for a classified board of directors who will serve
staggered terms and (ii) that a director may be removed prior
to expiration of his or her term for cause only.
FOR AGAINST ABSTAIN
3,134,952 554,279 24,483
14
3) To amend the Company's Articles of Incorporation and by-laws
(i) to provide that shareholders may take action at a duly
called meeting or by unanimous consent only and (ii) to require
a shareholder to disclose to the Company certain information
with respect to nominees and business items.
FOR AGAINST ABSTAIN
3,062,802 613,779 37,133
4) To amend the Company's Articles of Incorporation and by-laws to
(i) increase the number of authorized shares of common stock to
20,000,000 shares and create a series of preferred stock
consisting of 100,000 shares of $1.00 par value.
FOR AGAINST ABSTAIN
3,035,996 635,277 42,441
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 3.1 - Restated Articles of Incorporation of the registrant.
Exhibit 3.2 - By-Laws of the registrant.
Exhibit 10.1 - Stock Purchase Agreement between registrant and IDEXX
Laboratories, Inc. dated February 17, 2000.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
-------------------
The Company filed a report with the Commission on March 2, 2000 on Form 8-K
reporting under Item 2 the purchase of the common stock of Acumedia
Manufacturers, Inc. Financial information required under Item 7 is expected
to be filed within 60 days of March 2, 2000.
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEOGEN CORPORATION
4/14/00 /s/ James L. Herbert
- ------- --------------------
Date James L. Herbert
President
4/14/00 /s/ Richard R. Current
- ------- ----------------------
Date Richard R. Current
Vice President - Chief Financial Officer
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
3.1 Restated Articles of Incorporation of the registrant.
3.2 By-Laws of the registrant.
10.1 Stock Purchase Agreement between registrant and IDEXX
Laboratories, Inc. dated February 17, 2000.
27 Financial Data Schedule
C&S-510 (10/99)
- -----------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES
CORPORATION, SECURITIES AND LAND DEVELOPMENT BUREAU
=============================================================================
Date Received (FOR BUREAU USE ONLY)
This document is effective on the
date filed, unless a subsequent
- ------------------- effective date within 90 days after
received date is stated in the
document.
========================================
RICHARD C LOWE
- ----------------------------------------
1000 MICHIGAN NATIONAL TOWER
- ----------------------------------------
LANSING MI 48933 EFFECTIVE DATE:
=============================================================================
Document will be returned to name and address you enter above
If left blank document will be mailed to the registered office.
RESTATED ARTICLES OF INCORPORATION
For use by Domestic Profit Corporations
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, the
undersigned corporation executes the following Articles:
- -----------------------------------------------------------------------------
1. The present name of the corporation is: Neogen Corporation
2. The identification number assigned by the Bureau is: 059-092
3. All former names of the corporation are: None
4. The date of filing the original Articles of Incorporation was:
June 30, 1981
- -----------------------------------------------------------------------------
The following Restated Articles of Incorporation supersede the
Articles of Incorporation as amended and shall be the Articles of
Incorporation for the corporation:
Article I
- -----------------------------------------------------------------------------
The name of the corporation is: Neogen Corporation
- -----------------------------------------------------------------------------
Article II
- -----------------------------------------------------------------------------
The purpose or purposes for which the corporation is formed are to engage in
any activity within the purposes for which corporations may be organized
under the Business Corporation Act of Michigan.
- -----------------------------------------------------------------------------
Article III
- -----------------------------------------------------------------------------
The total authorized shares:
Common Shares: 20,000,000 Preferred Shares: 100,000
Par Value: $0.16 Par Value: $1.00
A statement of all or any of the relative rights, preferences and limitations
of the shares of each class is as follows:
The Preferred Stock shall be issued from time to time in one or more
series of such number of shares with such distinctive serial designations and
(a) may have such voting powers; (b) may be subject to redemption at such
time or times and at such prices; (c) may be entitled to receive dividends
(which may be cumulative or non-cumulative) at such rate or rates, on such
conditions, and at such times, and payable in preference to, or in such
relation to, the dividends payable on any other class or clases or series of
stock; (d) may have such rights upon the dissolution of or upon any
distribution of the asets of, the Company; (e) may be convertible into, or
exchangeable for, shares of any other class or classes or of any other series
of the same or any other class or classes of stock of the Company, at such
price or prices or at such rates of exchange, and with such adjustments; and
(f) may have such other relative participation, optional or other special
rights, preferences, qualifications, limitations, or restrictions thereof,
all as shall hereafter be stated and expressed in the resolution or
resolutions providing for the issue of each such series of Preferred Stock
from time to time adopted by the Board of Directors pursuant to the authority
so to do which is hereby expressly vested in the Board of Directors.
- -----------------------------------------------------------------------------
Article IV
- -----------------------------------------------------------------------------
1. The address of the current registered office is:
620 Lesher Place, Lansing, MI 48912
2. The mailing address of the current registered office, if
different than above:
n/a
3. The name of the current resident agent is: James L. Herbert, Jr.
- -----------------------------------------------------------------------------
Article V
- -----------------------------------------------------------------------------
When a compromise or arrangement or a plan of reorganization of this
corporation is proposed between this corporation and its creditors or any
class of them or between this corporation and its shareholders or any class
of them, a court of equity jurisdiction within the state, on application of
this corporation or of a creditor or shareholder thereof, or on application
of a receiver appointed for the corporation, may order a meeting of the
creditors or class of creditors or of the shareholders or class of
shareholders to be affected by the proposed compromise or arrangement or
reorganization, to be summoned in such manner as the court directs. If a
majority in number representing 3/4 in value of the creditors or class of
creditors, or of the shareholders or class of shareholders to be affected by
the proposed compromise or arrangement or a reorganization, agree to a
compromise or arrangement or a reorganization of this corporation as a
consequence of the compromise or arrangement, the compromise or arrangement
and the reorganization, if sanctioned by the court to which the application
has been made, shall be binding on all the creditors or class of creditors,
or on all the shareholders or class of shareholders and also on this
corporation.
- -----------------------------------------------------------------------------
Article VI
- -----------------------------------------------------------------------------
Any action required or permitted to be taken without a meeting of
shareholders may be taken without a meeting if a consent in writing, setting
forth such action, is signed by each shareholder entitled to vote on the
matter and any other shareholder entitled to notice of a meeting (but not to
vote thereat) has waived in writing any right to dissent from such action,
and such consent and waiver are filed with the minutes of proceedings of the
shareholders.
- -----------------------------------------------------------------------------
Article VII
- -----------------------------------------------------------------------------
A director is not personally liable to the Corporation or its shareholders
for money damages for any action taken or any failure to take an action as a
director, except liability for any of the following:
(i) The amount of a financial benefit received by a director to
which he or she is not entitled;
(ii) Intentional infliction of harm on the Corporation or the
shareholders;
(iii) A violation of Section 551 of the Michigan Business
Corporation Act; or
(iv) An intentional criminal act.
Any repeal or modification of this Article VII by the shareholders of the
corporation shall not adversely affect any right or protection of a director
of the corporation existing at the time of such repeal or modification.
- -----------------------------------------------------------------------------
Article VIII
- -----------------------------------------------------------------------------
The number of directors which shall constitute the whole board shall not be
less than five nor more than nine. Within these limits, the number of
directors shall be determined from time to time by resolution of the Board of
Directors. In lieu of electing the whole number of directors annually, the
directors shall be divided into three classes designated as Class I, Class
II, and Class III, each class to be as nearly equal in number as possible.
The term of office of the Class I directors shall expire at the first annual
meeting of the shareholders after the date on which this provision first
becomes effective. The term of office of the Class II directors shall expire
at the second annual meeting of the shareholders after the date on which this
provision first becomes effective. The term of office of the Class III
directors shall expire at the end of the third annual meeting after this
provision first becomes effective. After such classification, each class of
directors shall serve a term of three years. The class of directors whose
term expires at the time of the shareholders' meeting for a given year shall
be elected to hold office until the third succeeding annual meeting.
Notwithstanding any of the foregoing, each director shall serve until his or
her successor is elected and has qualified or until the director's death,
retirement, resignation or removal. Should a vacancy occur or be created, any
director elected or appointed to fill such vacancy shall serve for the full
term of the class in which the vacancy occurs or is created. If the number of
directors is changed, any increase or decrease in the number of directors
shall be apportioned among the classes so directors in each class remains as
nearly equal in number as possible.
- -----------------------------------------------------------------------------
5. COMPLETE SECTION (a) IF THE RESTATED ARTICLES WERE ADOPTED BY THE
UNANIMOUS CONSENT OF THE INCORPORATOR(S) BEFORE THE FIRST MEETING OF THE
BOARD OF DIRECTORS; OTHERWISE, COMPLETE SECTION (b). DO NOT COMPLETE
BOTH.
a. These Restated Articles of Incorporation were duly adopted
--- on the _______ day of _________________, _______ in
accordance with the provisions of Section 642 of the Act by
the unanimous consent of the incorporator(s) before the
first meeting of the Board of Directors.
Signed this _______ day of ______________, ______.
------------------------- ------------------------
(Signatures of all incorporators; type or print name
under each signature)
b. X These Restated Articles of Incorporation were duly adopted
--- on the 7th day of October, 1999 in accordance with the
provisions of Section 642 of the Act and: (check one of the
following)
--- were duly adopted by the Board of Directors without a vote
of the shareholders. These Restated Articles of
Incorporation only restate and integrate and do not further
amend the provisions of the Articles of Incorporation as
heretofore amended and there is no material discrepancy
between those provisions and the provisions of these
Restated Articles.
X were duly adopted by the shareholders. The necessary number
--- of shares as required by statute were voted in favor of
these Restated Articles.
--- were duly adopted by the written consent of the shareholders
having not less than the minimum number of votes required by
statute in accordance with Section 407(1) of the Act.
Written notice to shareholders who have not consented in
writing has been given. (Note: Written consent by less than
all of the shareholders is permitted only if such provision
appears in the Articles of Incorporation.)
--- were duly adopted by the written consent of all the
shareholders entitled to vote in accordance with Section
407(2) of the Act.
Signed this _______ day of February, 2000.
By _______________________________________
James L. Herbert, Jr., President
Name of person or organization Preparer's name and
remitting fees: business telephone number:
Neogen Corporation Richard C. Lowe
517-377-0861
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INFORMATION AND INSTRUCTIONS
1. The articles of incorporation cannot be restated until this form, or a
comparable document, is submitted.
2. Submit one original of this document. Upon filing, the document will be
added to the records of the Corporation, Securities and Land Development
Bureau. The original will be returned to the address appearing in the
box on the front as evidence of filing.
Since this document will be maintained on optical disk media, it is
important that the filing be legible. Documents with poor black and
white contrast, or otherwise illegible, will be rejected.
3. This document is to be used pursuant to sections 641 through 643 of the
Act for the purpose of restating the articles of incorporation of a
domestic profit corporation. Restated articles of incorporation are an
integration into a single instrument of the current provisions of the
corporation's articles of incorporation, along with any desired
amendments to those articles.
4. Restated articles of incorporation which do not amend the articles of
incorporation may be adopted by the board of directors without a vote of
the shareholders. Restated articles of incorporation which amend the
articles of incorporation require adoption by the shareholders. Restated
articles of incorporation submitted before the first meeting of the
board of directors require adoption by the incorporators.
5. Item 2 -- Enter the identification number previously assigned by the
Bureau. If this number is unknown, leave it blank.
6. The duration of the corporation should be stated in the restated
articles of incorporation only if it is not perpetual.
7. This document is effective on the date endorsed "filed" by the Bureau. A
later effective date, no more than 90 days after the date of delivery,
may be stated as an additional article.
8. If the restated articles are adopted before the first meeting of the
board of directors, item 5(a) must be completed signed in ink by a
majority of the incorporators. Other restated articles must be signed by
the president, vice-president, chairperson or vice-chairperson.
9. FEES: Make remittance payable to the State of Michigan. Include
corporation name and identification number on check or money order
<TABLE>
<S> <C>
NONREFUNDABLE FEE.........................................................................................$10.00
TOTAL MINIMUM FEE.........................................................................................$10.00
ADDITIONAL FEES DUE FOR INCREASED AUTHORIZED SHARES ARE:
each additional 20,000 authorized shares or portion thereof..........................................$30.00
maximum fee for first 10,000,000 authorized shares................................................$5,000.00
each additional 20,000 authorized shares or portion thereof in excess of 10,000,000 shares...........$30.00
maximum fee per filing for authorized shares in excess of 10,000,000 shares.....................$200,000.00
<S> <C>
10. Mail form and fee to: The office is located at:
Michigan Department of Consumer and Industry Services 6546 Mercantile Way
Corporation, Securities and Land Development Bureau Lansing, MI 48910
Corporation Division Telephone: (517) 334-6302
P.O. Box 30054
Lansing, Michigan 48909-7554
</TABLE>
- -----------------------------------------------------------------------------
BYLAWS
OF
NEOGEN CORPORATION
Article I
OFFICES
Section 1. Offices. The principal office of the Corporation shall be
located in the State of Michigan. The Corporation may have such other
offices, within or without the State of Michigan, as the Board of Directors
designates.
Section 2. Operating Facilities. The principal operating facilities,
including, but not limited to, research and development facilities, shall be
located in the State of Michigan, and not more than 20 miles from the
boundary of the main campus of Michigan State University. The Corporation may
have such other facilities, within or without the State of Michigan, as the
Board of Directors designates.
Article II
MEETINGS
Section 1. Place of Meeting. Any and all meetings of the
shareholders and of the Board of Directors shall be held within the State of
Michigan.
Section 2. Annual Meeting of Shareholders. After the year 1981, an
annual meeting of the shareholders shall be held in each year on the _______,
or at such other date and time as designated by the Board of Directors, and
at the principal office of the corporation, or at such other place within the
State of Michigan as designated by the Board of Directors, one of the
purposes of which shall be the election of a Board of Directors.
Section 3. Delayed Annual Meeting. If, for any reason, the annual
meeting of the shareholders shall not be held on the day hereinbefore
designated, such meeting may be called and held as a delayed annual meeting
or as a special meeting.
Section 4. Special Meetings of Shareholders. A special meeting of
the shareholders may be called at any time by the President, or by a majority
of the Board of Directors, or by shareholders entitled to vote not less than
an aggregate of 50 percent of the outstanding shares of any class of stock of
the Corporation having the right to vote at such special meeting. The method
by which such meeting may be called is as follows: Upon receipt of a
specification in writing setting forth the date and objects of such proposed
special meeting, signed by the President, or by a majority of the Board of
Directors, or by shareholders as above provided, the Secretary of this
Corporation shall prepare, sign and mail the notices requisite to such
meeting.
Section 5. Notice of Meetings of Shareholders. At least 10 days, but
no more than 60 days prior to the date fixed for the holding of any meeting
of
shareholders, written notice of the time, place and purpose of such
meeting shall be mailed as hereinafter provided, or personally delivered, to
each shareholder entitled to vote at such meeting.
Section 6. Organizational Meeting of Board. At the place of holding
the annual meeting of shareholders, and immediately following such meeting,
the Board of Directors, as constituted upon final adjournment of such annual
meeting, shall convene for the purpose of electing officers and transacting
any other business properly brought before it; provided, that the
organizational meeting in any year may be held at a different time and place
than that herein provided by consent of a majority of the directors of such
new Board.
Section 7. Regular Meetings of Board. Regular meetings of the Board
of Directors may be held at such times and places as the Board of Directors
shall from time to time determine. No notice of regular meetings of the Board
shall be required.
Section 8. Special Meetings of Board. Special meetings of the Board
of Directors may be called by the President, or by any member of the Board of
Directors, at any time by means of written or personal notice of the time and
place thereof to each director.
Section 9. Mailing of Notices. Every written notice shall be deemed
duly served when the same has been deposited in the United States mail, with
postage fully prepaid, plainly addressed to each director at his or her last
address appearing upon the books of this Corporation.
Section 10. Waiver of Notice. Any notices herein provided for may be
waived by telegram, radiogram cablegram or other writing, either before, at,
or after such meeting. Attendance at the meeting in person or by proxy shall
also constitute waiver of notice unless the person so attending expressly
objects to the meeting at the commencement of the meeting as not being
lawfully called or convened.
Article III
NOMINATIONS FOR DIRECTORS AND OTHER AGENDA ITEMS
Section 1. Annual Meetings of Shareholders.
(a) Nominations of persons for election of the Board of
Directors and the proposal of business to be considered by the shareholders
may be made at an annual meeting of shareholders (i) pursuant to the
Company's notice of meeting; (ii) by or at the direction of the directors; or
(iii) by any shareholder of the Company who was a shareholder of record both
at the time of giving a notice provided for in this Section and at the time
of the annual meeting, who is entitled to vote at the meeting and who
complied with the notice procedures set forth in this Section.
(b) For nominations or other business to be properly brought
before an annual meeting by a shareholder pursuant to clause (iii) of
paragraph (a) of this section, the shareholder must have given timely notice
thereof in writing to the Secretary of the Company and such other business
must otherwise be a proper matter
2
for action by shareholders. To be timely, a shareholder's notice shall be
delivered to the Secretary at the principal executive offices of the Company
not later than the close of business on the 60th day nor earlier than the
close of business on the 90th day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that
the date of the annual meeting is advanced by more than 30 days or delayed by
more than 60 days from such anniversary date or if the Company has not
previously held an annual meeting, notice by the shareholder to be timely
must be so delivered not earlier than the close of business on the 90th day
prior to such annual meeting and not later than the close of business on the
later of the 60th day prior to such annual meeting or the 10th day following
the day on which public announcement of the date of such meeting is first
made by the Company. In no event shall the public announcement of a
postponement or adjournment of an annual meeting to a later date or time
commence a new time period for the giving of a shareholder's notice as
described above. Such shareholder's notice shall set forth (i) as to each
person whom the shareholder proposes to nominate for election or reelection
as a director all information relating to such person that is required to be
disclosed in solicitation of proxies for election of directors, or is
otherwise required in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (including
such person's written consent to being named in the proxy statement as a
nominee and to serving as a director) if elected; (ii) as to any other
business that the shareholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest
in such business of such shareholder and of the beneficial owner, if any, on
whose behalf the proposal is made; and (iii) as to the shareholder giving the
notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made, (x) the name and address of such shareholder, as they
appear on the Company's books, and of such beneficial owner, and (y) the
number of each class of shares of the Company which are owned beneficially
and of record by such shareholder and such beneficial owner.
(c) Notwithstanding anything in the second sentence of
paragraph (b) of this Section to the contrary, in the event that the number
of directors to be elected to the Board of Directors is increased and there
is no public announcement by the Company naming all of the nominees for
director or specifying the size of the increased Board of Directors at least
70 days prior to the first anniversary of the preceding year's annual
meeting, a shareholder's notice required by this section shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Company not later than the close of
business on the 10th day following the day on which such public announcement
is first made by the Company.
Section 2. Special Meeting of Shareholders. Only such business shall
be conducted at a special meeting of the shareholders as shall have been
brought before the meeting pursuant to the Company's notice of meeting.
Nominations of persons for election to the Board of Directors may be made at
a special meeting of shareholders at which directors are to be elected: (i)
pursuant to the Company's notice of meeting; (ii) by or at the direction of
the Board of Directors; or (iii) provided that the Board of Directors has
determined that directors shall be elected at such special meeting, by any
shareholder of the Company who was a shareholder of record both at the time
of giving of notice provided for in this Section and at the time of the
special meeting, who
3
is entitled to vote at the meeting and who complied with the notice
procedures set forth in this section. In the event the Company calls a
special meeting of shareholders for the purpose of electing one or more
directors to the Board of Directors, any such shareholder may nominate a
person or persons (as the case may be) for election to such position as
specified in the Company's notice of meeting, if the shareholder's notice
containing the information required by Section 1(b) of this section shall be
delivered to the Secretary at the principal executive offices of the Company
not earlier than the close of business on the 90th day prior to such special
meeting and not later than the close of business on the later of the 60th day
prior to such special meeting or the 10th day following the day on which
public announcement is first made of the date of the special meeting and of
the nominees proposed by the directors to be elected at such meeting. In no
event shall the public announcement of the postponement or adjournment of a
special meeting to a later date or time commence a new time period for the
giving of a shareholder's notice as described above.
Section 3. General.
(a) Only such persons who are nominated in accordance with
the procedures set forth in this section shall be eligible to serve as
directors and only such business shall be conducted at a meeting of
shareholders as shall have been brought before the meeting in accordance with
the procedures set forth in this section. The presiding officer of the
meeting shall have the power and duty to determine whether a nomination or
any business proposed to be brought before the meeting was made in accordance
with the procedures set forth in this section and, if any proposed nomination
or business is not in compliance with this section, to declare that such
defective nomination or proposal be disregarded.
(b) For purpose of this section, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable news service or in a document publicly filed
by the Company with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(c) Notwithstanding the foregoing provisions of this section,
a shareholder shall also comply with all applicable requirements of state law
and of the Exchange Act and the rules and regulations thereunder with respect
to the matters set forth in this section. Nothing in this section shall be
deemed to affect any rights of shareholders to request inclusion of proposals
in the Company's proxy statement pursuant to Rule 14a-8 under the Exchange
Act.
Article IV
QUORUM
Section 1. Quorum of Shareholders. A majority of the outstanding
shares of each class of stock of this Corporation entitled to vote, present
by the record holders thereof in person or by proxy, shall constitute a
quorum at any meeting of the shareholders.
4
Section 2. Quorum of Directors. A majority of the directors shall
constitute a quorum.
Article V
VOTING, ELECTIONS AND PROXIES
Section 1. Who Entitled to Vote. Subject to Section 2 hereof, and
Article III of the Articles of Incorporation, each shareholder, at every
meeting of the shareholders, shall be entitled to one vote, in person or by
proxy, for each share of common stock of this Corporation held by such
shareholder.
Section 2. Record Date for Determination of Shareholders. The record
date for determination of the shareholders entitled to vote at any meeting of
the shareholders shall be set by the Board of Directors of the Corporation;
provided, however that in any event said record date shall not be less than
10 days preceding the date of the meeting of the shareholders. Only such
shareholders as shall be shareholders of record on the date so fixed by the
Board of Directors shall be entitled to notice of and to vote at such meeting
of the shareholders.
Section 3. Participation in Shareholder Meetings. A shareholder may
participate in a meeting of shareholders by a conference telephone or similar
communication equipment; provided, however that all shareholders
participating in the shareholders meeting shall be able to hear each other.
All participants in the shareholders meeting shall be advised of the
communications equipment and the names of the participants in the conference
shall be divulged to all participants. Participation in a meeting pursuant to
this procedure shall constitute presence in person at the shareholders
meeting.
Section 4. Proxies. No proxy shall be deemed operative unless and
until signed by the shareholder and filed with the Corporation. In the
absence of limitation to the contrary contained in the proxy, the same shall
extend to all meetings of the shareholders and shall remain in force three
years from its date, and no longer.
Section 5. Vote by Shareholder Corporation. Any other corporation
owning voting shares in this Corporation may vote the same by an officer or
agent, or by proxy appointed by an officer or agent or by some other person,
who by action of its Board or pursuant to its Bylaws, shall be authorized to
vote such shares.
Section 6. Inspectors of Election. Whenever any person entitled to
vote at a meeting of the shareholders shall request the appointment of
inspectors, the presiding officer of the meeting shall appoint not more than
three inspectors, who need not be shareholders. If the right of any person to
vote at such meeting shall be challenged, the inspectors shall determine such
right. The inspectors shall receive and count the votes upon an election, and
for the decision of any question, shall determine the result. The certificate
of the inspectors on any vote shall be prima facie evidence thereof.
5
Article VI
BOARD OF DIRECTORS
Section 1. Number and Term of Directors. The number of directors
which shall constitute the whole board shall not be less than five nor more
than nine. Within these limits, the number of directors shall be determined
from time to time by resolution of the Board of Directors. In lieu of
electing the whole number of directors annually, the directors shall be
divided into three classes designated as Class I, Class II, and Class III,
each class to be as nearly equal in number as possible. The term of office of
the Class I directors shall expire at the first annual meeting of the
shareholders after the date on which this provision of the Bylaws first
becomes effective. The term of office of the Class II directors shall expire
at the second annual meeting of the shareholders after the date on which this
provision of the Bylaws first becomes effective. The term of office of the
Class III directors shall expire at the end of the third annual meeting after
this provision of the Bylaws first becomes effective. After such
classification, each class of directors shall serve a term of three years.
The class of directors whose term expires at the time of the shareholders'
meeting for a given year shall be elected to hold office until the third
succeeding annual meeting. Notwithstanding any of the foregoing, each
director shall serve until his or her successor is elected and has qualified
or until the director's death, retirement, resignation or removal. Should a
vacancy occur or be created, any director elected or appointed to fill such
vacancy shall serve for the full term of the class in which the vacancy
occurs or is created. If the number of directors is changed, any increase or
decrease in the number of directors shall be apportioned among the classes so
directors in each class remains as nearly equal in number as possible.
Section 2. Removal of Directors. A director or the entire Board of
Directors may be removed only for cause.
Section 3. Action by Unanimous Written Consent. If and when the
Directors shall unanimously consent in writing to any action to be taken by
the Corporation, such action shall be as valid corporate action as though it
had been authorized at a meeting of the Board of Directors.
Section 4. Power to Elect Officers. The Board of Directors shall
select a president, a secretary and a treasurer and such other officers and
agents as the Board may deem necessary for the transaction of the business of
the Corporation.
Section 5. Removal of Officers and Agents. Any officer or agent may
be removed by the Board of Directors with or without cause.
Section 6. Power to Fill Vacancies. A majority of the Board shall
have power to fill any vacancy in any office occurring for any reason
whatsoever. Any director elected by the Board shall hold office until the
next annual meeting of the shareholders.
Section 7. Delegation of Powers. For any reason deemed sufficient by
the Board of Directors, the Board may delegate all or any of the powers and
duties of any officer to any other officer or director, but no officer or
director shall execute,
6
acknowledge or verify any instrument in more than one capacity where
prohibited by applicable statute.
Section 8. Power to Appoint Executive Committee. The Board of
Directors shall have power to appoint by resolution an Executive Committee
composed of one or more directors who, to the extent provided by such
resolution, shall have and exercise the authority of the Board of Directors
in the management of the business of the Corporation between meetings of the
Board.
Section 9. Compensation. The compensation of directors, officers and
agents may be fixed by the Board or the power to fix such compensation may be
delegated by the Board.
Article VII
OFFICERS
Section 1. President. The President shall be the chief executive
officer of the Corporation. He shall have general and active management of
the business of the Corporation and shall see that all orders and resolutions
of the Board are carried into effect.
Section 2. Vice Presidents. One or more Vice Presidents may be
elected by the Board. The Vice Presidents, in the order of their seniority,
shall perform the duties and exercise the powers of the President during the
absence or disability of the President.
Section 3. Secretary. The Secretary shall attend all meetings of the
shareholders, the Board of Directors and the Executive Committee, and shall
preserve in books of the Company true minutes of the proceedings of all such
meetings. He shall give all notices required by statute, bylaw or resolution.
He shall perform such other duties as may be delegated to him by the Board of
Directors or by the Executive Committee.
Section 4. Treasurer. The Treasurer shall have custody of all
corporate funds and securities and shall keep in books belonging to the
Corporation full and accurate accounts of all receipts and disbursements. He
shall deposit all moneys, securities and other valuable effects in the name
of the Corporation in such depositories as may be designated for that purpose
by the Board of Directors. He shall disburse the funds of the corporation as
ordered by the Board, taking proper vouchers for such disbursements, and
shall render to the President and the Board of Directors, whenever requested
by them, an account of all his transactions as Treasurer and of the financial
condition of the Corporation.
Section 5. Assistant Secretary and Assistant Treasurer. The
Assistant Secretary, in the absence or disability of, or upon order by the
Secretary, shall perform the duties and exercise the powers of the Secretary.
The Assistant Treasurer in the absence or disability of, or upon order by the
Treasurer, shall perform the duties and exercise the powers of the Treasurer.
7
Section 6. Combined Offices. The Board of Directors may combine any
of the above-described offices.
Article VIII
STOCKS AND TRANSFERS
Section 1. Certificates for Shares. Every shareholder shall be
entitled to a certificate for his shares signed by the President, or by a
Vice President and the Secretary, or the Treasurer, or the Assistant
Secretary or the Assistant Treasurer under the seal of the Corporation,
certifying the number and class of shares represented by such certificates,
which certificates shall state the terms and provisions of said class of
shares of stock of the Corporation, and if such shares are not fully paid,
the amount paid; provided, that where such certificate is signed by a
transfer clerk acting on behalf of such Corporation or by a registrar, the
signature of any such President, Vice President, Secretary, Assistant
Secretary, Treasurer or Assistant Treasurer, and the seal of the Corporation,
may be facsimile.
Section 2. Transferable Only on Books of Corporation. Shares shall
be transferable only on the books of the Corporation by the person named in
the certificate, or by an attorney lawfully constituted in writing, or by the
Secretary of the Corporation, and upon surrender of the certificate therefor.
A record shall be made of every such transfer and issue. Whenever any
transfer is made for collateral security and not absolutely that fact shall
be so expressed in the entry of such transfer.
Section 3. Registered Shareholders. The Corporation shall have the
right to treat the registered holder of any share as the absolute owner
thereof, and shall not be bound to recognize any equitable or other claim to,
or interest in, such share on the part of any other person, whether or not
the Corporation shall have express or other notice thereof, except as may be
otherwise expressly provided by the statutes of Michigan.
Section 4. Transfer Agent and Registrar. The Board of Directors may
appoint a transfer agent and registrar of transfers, and may require all
certificates of shares to bear the signature of such transfer agent and of
such registrar of transfers, or as the Board may otherwise direct.
Section 5. Regulations. The Board of Directors shall have power and
authority to make all such rules and regulations as the Board may deem
expedient regulating the issue, transfer and registration of certificates for
shares of this Corporation.
Article IX
DIVIDENDS AND RESERVES
Section 1. Source of Dividends. The Board of Directors shall have
power and authority to declare dividends from the surplus of the Corporation.
A dividend paid or any other distributions made, in any part, from sources
other than earned surplus, shall be accompanied by a written notice (a)
disclosing the amounts by which
8
the dividend or distribution affects stated capital, capital surplus and
earned surplus, or (b) if such amounts are not determinable at the time of
notice, disclosing the approximate effect of the dividend or distribution
upon stated capital, capital surplus and earned surplus, and stating that the
amounts are not yet determinable.
In determining earned surplus, the judgment of the Board of Directors shall
be conclusive in the absence of bad faith or gross negligence.
Section 2. Manner of Payment of Dividend. Dividends may be paid by
the Corporation in cash, in its own shares, in its own bonds, or in its own
property, including the shares or bonds of other corporations, or its
outstanding shares, except when currently the Corporation is insolvent or
would thereby be made insolvent. A share dividend paid or other distribution
of shares of the Corporation shall be accompanied by a written notice (a)
disclosing the amounts by which the distribution affects stated capital,
capital surplus and earned surplus, or (b) if such amounts are not
determinable at the time of the notice, disclosing the approximate affect of
the distribution upon stated capital, capital surplus and earned surplus and
stating that the amounts are not yet determinable.
Article X
RIGHT OF INSPECTION
Section 1. Balance Sheet. Upon written request of a shareholder, the
Corporation shall mail to the shareholder its balance sheet as of the end of
the preceding fiscal year; its statement of income for such fiscal year; and
if prepared by the Corporation, its statement of source and application of
funds for such fiscal year.
Section 2. Examination of Minutes and Records of Shareholders. Upon
10 days written demand, a shareholder of the Corporation may examine (for any
proper purpose in person or by agent or attorney, during usual business
hours) the Corporation's minutes of shareholders' meetings and the record of
shareholders, and make abstracts therefrom.
Article XI
EXECUTION OF INSTRUMENTS
Section 1. Checks, Contracts, Conveyances, Etc. The Board of
Directors shall have power to designate the officers and agents who shall
have authority to execute any instrument on behalf of this Corporation.
Article XII
SPECIAL PROVISIONS
Section 1. Indemnification of Officers and Directors. To induce any
person elected or appointed as an officer, director or employee of the
Corporation to assume such position, the Corporation agrees and hereby makes
a continuing offer to
9
indemnify any such person in any way arising out of such position to the
fullest extent allowed by applicable law.
Article XIII
AMENDMENT OF BYLAWS
Section 1. Amendments - How Effected. These Bylaws may be amended
solely by the affirmative vote of a majority of the outstanding shares of
each class of stock entitled to vote.
Section 2. Adoption of Bylaws. These Bylaws were originally approved
and adopted by the shareholders of the Corporation at a meeting thereof at
which a quorum was presented by a majority of the outstanding shares of each
class of stock of the Corporation on the 11th day of August, 1981, and have
since been amended from time to time.
10
Execution Copy
STOCK PURCHASE AGREEMENT
between
IDEXX LABORATORIES, INC.
and
NEOGEN CORPORATION
(relating to the Capital Stock of
Acumedia Manufacturers, Inc.)
-----------------------------
Dated as of February 17, 2000
-----------------------------
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") dated as of
February 17, 2000 is made by and between IDEXX Laboratories, Inc., a Delaware
corporation ("Seller"), and Neogen Corporation, a Michigan corporation
("Buyer").
Seller is the record and beneficial owner of all of the outstanding
shares of the capital stock (the "Shares") of Acumedia Manufacturers, Inc., a
Maryland corporation (the "Company"). Buyer desires to purchase, and Seller
desires to sell, the Shares for the consideration set forth below, subject to
the terms and conditions of this Agreement. In consideration of the mutual
promises hereinafter set forth and other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereby agree as follows.
ARTICLE 1
PURCHASE AND SALE OF THE SHARES
1.1 Purchase of the Shares from Seller. Subject to and upon the
terms and conditions of this Agreement, at the closing of the transactions
contemplated by this Agreement (the "Closing"), Seller shall sell, transfer,
convey, assign and delivery to Buyer, and Buyer shall purchase, acquire and
accept, the Shares.
1.2 Base Purchase Price for the Shares. The base purchase price to
be paid by Buyer for the Shares (the "Base Purchase Price") shall consist of
(i) $2,400,000 in cash, of which Buyer has already paid $100,000, and (ii)
Buyer's 7% promissory note due on the first anniversary of the Closing, in
the principal amount of $450,000, in the form set forth as Exhibit 1.2 to
this Agreement (the "Note"). Buyer shall pay the Base Purchase Price to
Seller at the Closing. The Base Purchase Price shall be subject to adjustment
after the Closing as provided in Section 1.4.
1.3 Additional Purchase Price for the Shares.
(a) In addition to the Base Purchase Price, Buyer shall pay Seller an
additional purchase price for the Shares (the "Additional Purchase Price") in
an amount equal to 40% of the gross revenues of the Company from sales of its
current and future products during the 12-month period commencing on the day
after the Closing Date (as defined in Section 1.5 below) and ending on the
first anniversary of the Closing Date (the "Anniversary Date") (such period,
the "Sales Period"), to the extent such revenues exceed $3,500,000; provided,
however, that the Additional Purchase Price shall not exceed $1,000,000.
Subject to the last sentence of Subsection 1.3(c), below, Buyer shall pay the
Additional Purchase Price to Seller in cash within 30 days after the
Anniversary Date. The Additional Purchase Price shall be subject to
adjustment after the Closing as provided in this Agreement.
(b) For purposes of determining the amount of the
Additional Purchase Price due to Seller, Buyer shall record the Company's
revenues from sales of its current and future products ("Revenues") in
accordance with the revenue recognition policies set forth as Exhibit 1.3(b)
to this Agreement (the "Revenue Recognition Policies"). Within 15 days after
each of March 31, 2000, June 30, 2000, September 30, 2000, December 31, 2000
and the Anniversary Date, Buyer shall prepare and deliver to Seller a
statement setting forth the Company's Revenues during the fiscal quarter (or
portion thereof) ending on such date. Each such statement shall be certified
as true and correct by Buyer's President and Chief Financial Officer, and
shall contain (i) the certification of such officers that, in determining
such Revenues, the Company has complied in all respects with the Revenue
Recognition Policies and (ii) such other information as Seller may reasonably
request to enable it to verify such statements.
(c) On or before July 31, 2001, Buyer shall cause its
independent public accountants to perform special procedures on the total
Revenues set forth on the statements delivered to Seller pursuant to Section
1.3(b) above, in accordance with the procedures set forth on Exhibit 1.3(b)
to this Agreement, in order to confirm that (i) the total Revenues set forth
on such statements are the actual Revenues of the Company for the Sales
Period, and (ii) in determining such Revenues, the Company has complied in
all material respects with the Revenue Recognition Policies. If such
accountants are unable to make such determinations and instead determine that
the actual Revenues of the Company for the Sales Period exceeded the sum of
the aggregate Revenues shown on such statements, then Buyer shall pay the
balance of the actual Additional Purchase Price determined to be due to
Seller within five days thereafter, without interest or penalty. In the
alternative, if such accountants determine that the sum of the aggregate
Revenues shown on such statements exceeded the actual Revenues of the Company
for such period, then Seller shall reimburse Buyer for the excess payments
over the actual Additional Purchase Price determined to be due to Seller
within five days thereafter, without interest or penalty.
1.4 Post-Closing Adjustments. The Base Purchase Price and the
Additional Purchase Price (collectively, the "Purchase Price") shall be
subject to adjustment after the Closing as set forth in this Section 1.4:
(a) On the 30th day after the Closing, Seller shall deliver
to Buyer a schedule of accounts payable of the Company as of the close of
business on the Closing Date which have not subsequently been paid (the
"Draft A/P Schedule"). Buyer shall deliver to Seller within 20 business days
after receiving the Draft A/P Schedule a detailed statement describing its
objections thereto, if any. Failure of Buyer to so object to the Draft A/P
Schedule shall constitute acceptance thereof, whereupon the Draft A/P
Schedule shall be deemed to be the "Closing A/P Schedule". Buyer and Seller
shall use reasonable efforts to resolve any such objections within 20 days
after Seller has received the statement of objections.
(b) Within 30 days after the Closing, Seller shall prepare
and deliver to Buyer a schedule of the Gross Assets of the Company as of the
Closing Date (the "Draft Gross Assets Schedule"). For this purpose, "Gross
Assets" shall be defined as (i) all of the Company's fixed assets as of the
Closing Date (valued at their respective cost less allowances for
depreciation), (ii) all of the Company's Inventories (as defined and
determined in accordance with Section 2.11 of this Agreement) as of the
Closing Date (valued at their last invoice prices and, as to finished goods,
plus the product of (X) $4.00 per pound, multiplied by (Y) the amount (in
pounds) of such finished goods), and (iii) all of the Company's accounts
receivable listed in Categories (1), (2) and (3) on Schedule 4.11 of the
Disclosure Schedule. Buyer shall deliver to Seller within 20 days after
receiving the Draft Gross Assets Schedule a detailed statement describing its
objections thereto, if any. Failure of Buyer to so object to the Draft Gross
Assets Schedule shall constitute acceptance thereof, whereupon the Draft
Gross Assets Schedule shall be deemed to be the "Closing Gross Assets
Schedule". Buyer and Seller shall use reasonable efforts to resolve any such
objections within 20 days after Seller has received the statement of
objections.
(c) If Buyer and Seller are unable to reach a final
resolution of either the Closing A/P Schedule or the Closing Gross Assets
Schedule, or both, within 20 days after Seller has received the statement(s)
of objections with respect thereto, then Buyer and Seller shall select a
national independent accounting firm of recognized standing by lot (after
excluding their respective regular independent accounting firms and the
Company's independent accounting firm). Such accounting firm shall determine,
within 30 days of its appointment, whether those objections raised by Buyer
that have not previously been settled by negotiation between the parties are
appropriate. The Draft Closing A/P Schedule and the Draft Gross Assets
Schedule shall be adjusted in accordance with such firm's determination and,
as so adjusted, shall be the "Closing A/P Schedule" and the "Closing Gross
Assets Schedule", respectively (collectively, the "Closing Schedules"). Such
determination by such accounting
2
firm shall be conclusive and binding upon Buyer and Seller. The prevailing
party shall be entitled to recover, in addition to any other relief obtained,
the costs and expenses, including reasonable attorneys' fees and expenses,
incurred by the prevailing party in connection with the determination of the
Closing Schedules. The non-prevailing party shall pay the fees and expenses
of the accounting firm. For this purpose, the prevailing party shall be the
party whose position (excluding objections raised by Buyer that have
previously been settled by negotiation between the parties) is closest in
absolute dollars to that of the determination of the accounting firm.
(d) Seller shall reimburse Buyer, by wire transfer of
immediately available funds, within five business days after the date on
which the Closing A/P Schedule is finally determined pursuant to this Section
1.4, the amount shown on the Closing A/P Schedule. Seller shall further
reimburse Buyer, by wire transfer of immediately available funds, within five
business days after the date on which the Closing Gross Assets Schedule is
finally determined pursuant to this Section 1.4, the amount equal to the
excess, if any, of $2,550,000 over such value. Buyer shall reimburse Seller,
by wire transfer of immediately available funds, within five business days
after the date on which the Closing Gross Assets Schedule is finally
determined pursuant to this Section 1.4, the amount, if any, by which
$2,550,000 is less than such value.
1.5 Closing.
(a) The Closing shall take place at the offices of the
Company, at 9601 Pulaski Park Drive, Suites 410-412, Baltimore, Maryland,
immediately after the execution of this Agreement by Buyer and Seller. The
transfer of the Shares by the Seller to the Buyer shall be deemed to occur at
the close of business, Maryland time, on the day immediately preceding the
date of execution of this Agreement or on such other date as Seller and Buyer
may agree (the "Closing Date").
(b) At the Closing, in addition to the taking of such other
action as may be provided in this Agreement, Buyer shall deliver to Seller,
(i) $2,300,000 in cash (representing the portion of the Base Purchase Price
not already paid to Seller), by wire transfer of immediately available funds,
(ii) the Note; and (iii) such closing certificates and documents as may be
reasonably requested by counsel to Seller.
(c) At the Closing, in addition to the taking of such other
action as may be provided in this Agreement, Seller shall deliver to Buyer
(i) a certificate or certificates evidencing the Shares, duly endorsed in
blank or with stock powers duly executed; (ii) duly executed letters of
resignation, effective as of the Closing Date, of all officers and members of
the Company's Board of Directors; and (iii) such closing certificates and
documents as may be reasonably requested by counsel to Buyer.
1.6 Allocation of the Purchase Price. The Base Purchase Price
shall be allocated by the parties as follows: (a) $50,000 to the
noncompetition agreement set forth in Section 4.4 of this Agreement and (b)
the balance to the Shares. Any Additional Purchase Price payable to Seller
pursuant to Section 1.3, and any adjustment to the Base Purchase Price
pursuant to Section 1.4 above, shall be entirely allocated to the Shares. Any
amounts paid to Buyer pursuant to Section 4.11 shall reduce the amount of the
purchase price allocated to the Shares.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as set forth on the disclosure schedule delivered to Buyer on
the date hereof (the "Disclosure Schedule"), Seller and the Company jointly
and severally represent and warrant to Buyer as
3
follows. The term "knowledge", when used in this Agreement, shall mean actual
knowledge after reasonable investigation, of management of the Company or
Seller.
2.1 Organization and Qualification. Seller is a corporation duly
organized, validly existing and in good standing under the laws of Delaware;
the Company is a corporation duly organized, validly existing and in good
standing under the laws of Maryland; and each of Seller and the Company has
full corporate power and authority to own and operate its assets and to carry
on its business as now being conducted. The Company is not qualified or
otherwise authorized to transact business as a foreign corporation in any
jurisdiction, and the business conducted by the Company as of the Closing
Date does not make such qualification necessary.
.
2.2 Authority. Seller has full right, power, capacity and authority
to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby, including selling the Shares to Buyer. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of Seller. This Agreement has been
duly and validly executed and delivered by Seller and constitutes the valid
and binding obligation of Seller, enforceable against it in accordance with
the terms hereof. Neither the execution, delivery and performance of this
Agreement, nor the consummation of the transactions contemplated hereby will
(i) conflict with or result in a violation, breach, termination or
acceleration of, or default under (or would result in a violation, breach,
termination, acceleration or default with the giving of notice or passage of
time, or both) any of the terms, conditions or provisions of the
organizational documents of Seller or the Company, or, upon the Company
obtaining the Required Consents, of any note, bond, mortgage, indenture,
license, permit, agreement or other instrument or obligation to which Seller
or the Company is a party or by which Seller or the Company or any of its
properties or assets may be bound or affected; (ii) result in the violation
of any order, writ, injunction, decree, statute, rule or regulation
applicable to Seller or the Company or any of their respective properties or
assets; or (iii) result in the imposition of any lien, encumbrance, charge or
claim upon any assets of the Company. Except as set forth in Schedule 2.2 of
the Disclosure Schedule, no consent or approval by, or notification to or
filing with, any court, governmental authority or third party (the "Required
Consents") is required in connection with the execution, delivery and
performance of this Agreement by Seller or the consummation of the
transactions contemplated hereby.
2.3 Capitalization. The authorized capital stock of the Company
consists of 5,000 shares of common stock, without par value. There are 4,998
shares of the Company's common stock issued and outstanding, and these shares
constitute the total issued and outstanding share capital of the Company. All
of such shares have been duly authorized and validly issued, are fully paid,
nonassessable, free of preemptive rights and held of record and beneficially
by Seller. Seller has good and marketable title to the Shares and, upon
Closing, Buyer will acquire good and marketable title to the Shares. There
are no outstanding or authorized subscriptions, options, conversion or
exchange rights, warrants, rights, repurchase or redemption agreements, or
other agreements or commitments obligating the Company to issue, transfer,
sell, repurchase or redeem any shares of its capital stock. There are no
shareholder agreements, voting trusts, proxies or other agreements,
instruments or understandings with respect to the voting of the capital stock
of the Company. There are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to Company. The Shares are not
subject to any lien, claim, attachment, pledge, encumbrance or security
interest.
2.4 Subsidiaries. The Company has no subsidiaries. The Company is
not a partner or joint venturer with any other person. The Company is not
subject to any obligation, contingent or otherwise, to provide funds to or
make an investment (in the form of a loan, capital contribution or otherwise)
in any entity. Except for 3,379 Class C shares of Les Laboratoires Quelab,
Inc., the Company has no investments in any entity.
4
2.5 Financial Statements. Schedule 2.5 of the Disclosure Schedule
sets forth true and complete copies of the unaudited balance sheets of the
Company as at December 31, 1999 (the "Balance Sheet"), December 31, 1998 and
December 31, 1997, and the unaudited consolidated statement of operations of
the Company for the fiscal years ended December 31, 1999, December 31, 1998
and December 31 1997 (collectively, the "Financial Statements"). The
Financial Statements have been prepared from, and are in accordance with, the
books and records of the Company, and fairly present the financial condition
and results of operations of the Company as at the dates and for the periods
indicated, in each case in accordance with generally accepted accounting
principles applied on a basis consistent with previous years subject to
footnote disclosures.
2.6 Absence of Undisclosed Liabilities. As of the date of the
Balance Sheet (the "Balance Sheet Date"), the Company had no material
liabilities or obligations of any nature required by United States generally
accepted accounting principles ("GAAP") to be reflected or disclosed on the
Balance Sheet that were not reflected or reserved against on the Balance
Sheet. As of the date of this Agreement, the Company has no liabilities or
obligations of any nature, including any liability for termination of the
Acumedia Manufacturers, Inc. Defined Benefit Pension Plan and Trust, other
than liabilities (a) reflected or reserved against on the Balance Sheet, (b)
incurred since the Balance Sheet Date in the ordinary course of business
consistent with past practice, (c) pursuant to one or more of the contracts
and agreements referred to in Section 2.18 of this Agreement, or (d) that
would not, in the aggregate, have a material adverse effect on the Company.
2.7 Taxes. The Company has accurately prepared and duly and timely
filed all federal, state, local and foreign tax and other returns and reports
which were required to be filed, in respect of all income, receipts,
franchise, excise, sales, use, property (real and personal), transfer, VAT,
payroll and other taxes, fees, levies, customs, imports, duties, license and
registration fees, charges or withholdings of any nature whatsoever,
including any interest, fines or penalties with respect thereto (collectively
"Taxes"), and to the extent the liabilities of the Company for Taxes have not
been fully discharged, adequate reserves have been established on the Balance
Sheet. None of the federal, state, local, provincial or foreign Tax returns
of the Company has been audited or examined by the governmental authority
having jurisdiction. No waivers of any statutes of limitation are in effect
in respect of any Taxes. The Company is not in default in the payment of any
Taxes due and payable or on any assessments received in respect thereof, and
there are no claims pending or, to the knowledge of Seller and the Company,
threatened, against the Company for past due Taxes. All Taxes incurred but
not yet due have been fully accrued on the books of the Company or full
reserves have been established therefor; the reserves indicated on the
Balance Sheets are also adequate to cover all Taxes that may become payable
by the Company in future periods in respect of any transactions or sales
occurring on or prior to the date of the Balance Sheet. The Company (i) is
not a "consenting corporation" with the meaning of Section 341(f) of the
Internal Revenue Code of 1986, as amended (the "Code"), and none of the
assets of the Company are subject to an election under Section 341(f) of the
Code; (ii) has not been a United States real property holding company with
the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code; (iii) has no actual or
potential liability for any Taxes of any person or entity under Treasury
Regulation Section 1.1502-6 (or any similar provision of federal, state,
local or foreign law), or as a transferee or successor, by contract, or
otherwise; and (iv) is not and has not been required to made a basis
reduction pursuant to Treasury Regulation Section 1.1502-20(b) or Treasury
Regulation Section 1.337-(d)-2(b).
2.8 Properties. The Company owns and has good and marketable title
to all of the assets and properties reflected on the Balance Sheet or
acquired by the Company since the date of Balance Sheet Date (except personal
property sold or otherwise disposed of in the ordinary course of business
since the Balance Sheet Date), free and clear of any lien, claim or other
encumbrance, except for (i) the liens,
5
claims or other encumbrances reflected on the Balance Sheet, (ii) assets and
properties disposed of, or subject to purchase or sales orders, in the
ordinary course of business since the Balance Sheet Date, (iii) liens, claims
or other encumbrances securing the liens of materialmen, carriers, landlords
and like persons, all of which are not yet due and payable, and (iv) liens
for taxes not yet delinquent. The Company has a valid leasehold interest in
the premises located at 9601 Pulaski Park Drive, Suites 410-412, Baltimore,
Maryland (the "Facility"). The Company owns and has good and marketable title
to all equipment and other tangible assets reflected on the Balance Sheet,
all of which are in good and sufficient operating condition and repair,
ordinary wear and tear excepted. The Company has not received any notice that
the Facility is in violation of any existing law or any building, zoning,
health, safety or other ordinance, code or regulation.
2.9 Environmental Matters. Except as disclosed on Schedule 2.9
of the Disclosure Schedule:
(a) The Company has never conducted or operated its
business from any location other than the Premises.
(b) The Company and the Premises comply with all applicable
Environmental Laws.
(c) No Hazardous Substances have been or are currently
generated, stored, transported, utilized, disposed of, managed, released or
located on, under or from the Premises (whether or not in reportable
quantities) by the Company or its agents or invitees, or in any manner
introduced onto the Premises by the Company or its agents or invitees,
including, without limitation, the septic, sewage or other waste disposal
systems serving the Premises, except in accordance with all applicable
Environmental Laws. Schedule 2.9(c) of the Disclosure Schedule sets forth a
list of materials originating at the Company's Facility for which the Company
has arranged disposition under its EPA small quantity generator license.
(d) Neither Seller nor the Company has any knowledge of any
threat of release of any Hazardous Substances on, under or from the Premises.
There is no threat of release of any Hazardous Substances which the Company
or its agents or invitees generated, stored, transported, utilized, disposed
of, managed or owned.
(e) The Company has no liability for response or corrective
action, natural resource damage, or other harm pursuant to any Environmental
Laws; the Company is not subject to, has no notice or knowledge of, and is
not required to give any notice of any Environmental Claim involving the
Company or the Premises; there are no conditions or occurrences at the
Premises which could form the basis for an Environmental Claim against the
Company. There are no Environmental Enforcement Actions pending or, to the
knowledge of Seller and the Company, threatened against the Company.
(f) Neither Seller nor the Company has received any notice
from the United States Environmental Protection Agency or any other
Governmental Authority claiming that (i) the Premises or any use thereof
violates any of the Environmental Laws, or (ii) Seller, the Company or any of
their employees or agents have violated any of the Environmental Laws.
(g) Neither Seller nor the Company has incurred any
liability to the State of Maryland, the United States of America or any other
Governmental Authority under any of the Environmental Laws.
(h) The Premises are not subject to any, and neither Seller
nor the Company has any knowledge of any imminent, restriction on the
ownership, occupancy, use, or transferability of the
6
Premises in connection with any (i) Environmental Laws or (ii) Release,
threatened Release, or disposal of Hazardous Substances.
(i) The Premises do not contain and have not contained any:
(i) underground storage tanks, (ii) any amount of asbestos-containing
building material, (iii) any landfills or dumps, (iv) Hazardous Substances
resulting in its classification as a hazardous waste management facility as
defined pursuant to RCRA or any comparable state law, or (v) Hazardous
Substances resulting in its classification as a site on or nominated for the
National Priority List promulgated pursuant to CERCLA or any state remedial
priority list promulgated or published pursuant to any comparable state law.
(j) The Company and its agents and invitees (including
without limitation Seller, to the extent related to the Company, its business
or the Premises) have not generated, stored, transported, utilized, disposed
of, managed or released any Hazardous Substances on any parcel of real estate
other than the Premises.
(k) There are no conditions or circumstances at or
migrating from the Premises which pose a risk to the environment or the
health or safety of persons.
(l) No environmental reports, investigations or audits
relating to the Premises (collectively, "Reports") have been conducted by or
on behalf of Seller or the Company, and, to the knowledge of Seller and the
Company, no such Reports have been conducted by any governmental or other
third party. Copies of all Reports identified on Schedule 2.9 of the
Disclosure Schedule have been provided to Buyer.
(m) The following definitions apply to this Section 2.9:
(i) "CERCLA" shall mean the Comprehensive
Environmental Response Compensation, and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorizations Act of 1986, 42 USC 9601 et
seq., and future amendments;
(ii) "Environmental Claim" shall mean any
investigation, notice, violation, demand, allegation, action, suit,
injunction, judgment, order, consent decree, penalty, fine, lien, proceeding,
or claim (whether administrative, judicial, or private in nature) arising (A)
pursuant to, or in connection with, an actual or alleged violation of, any
Environmental Laws, (B) in connection with any Hazardous Substances, (C) from
any abatement, removal, remedial, corrective, or other response action in
connection with Hazardous Substances, Environmental Laws or other order of a
Governmental Authority or (D) from any actual alleged damage, injury, threat,
or harm to health, safety, natural resources, or the environment;
(iii) "Environmental Enforcement Actions" means
actions or orders instituted, threatened, required or completed by any
Governmental Authority and all claims made or threatened by any person
against Seller or the Company with respect to the Premises arising out of or
in connection with any of the Environmental Laws or the assessment,
monitoring, clean-up, containment, re-mediation or removal of, or damages
caused or alleged to be caused by, any Hazardous Substances (A) located on or
under the Premises, (B) emanating from the Premises or (C) generated, stored,
transported, utilized, disposed of, managed or released by the Company or by
the Seller on, under or from the Premises;
(iv) "Environmental Laws" means federal, state and
local laws, statutes, ordinances, rules, regulations, codes, orders,
judgments, orders and the like applicable to (A) environmental conditions on,
under or emanating from the Premises including, but not limited to, (a) laws
7
of the State of Maryland; and the associated rules and regulations
promulgated in connection with any of these laws, and (b) laws of the federal
government commonly known as CERCLA, RCRA, the Toxic Substance Control Act,
as amended, the Federal Water Pollution Control Act, as amended, and the
Federal Clean Air Act; and the associated rules and regulations promulgated
in connection with any of these laws; and (B) the generation, storage,
transportation, utilization, disposal, management or release of Hazardous
Substances by the Company (whether or not on, under or from the Premises) or
Seller (on, under or from the Premises);
(v) "Governmental Authority" means agencies,
authorities, bodies, boards, commissions, courts, instrumentalities,
legislatures and offices of any nature whatsoever for any government unit or
political subdivision, whether federal, state, county, district, municipal,
city or otherwise, and whether now or later in existence;
(vi) "Hazardous Substances" shall mean,
collectively, (A) any "hazardous material," "hazardous substance," "hazardous
waste," "oil," "regulated substance," "toxic substance," "restricted
hazardous waste," "special waste" or words of similar import as defined under
any of the Environmental Laws; (B) asbestos in any form; (C) urea
formaldehyde foam insulation; (D) polychlorinated biphenyls; (E) radon gas;
(F) flammable explosives; (G) radioactive materials; (H) any chemical,
contaminant, solvent, material, pollutant or substance that may be dangerous
or detrimental to the environment or the health and safety of occupants of
the Premises or of the owners or occupants of any other real property nearby
the Premises, and (I) any substance, the generation, storage, transportation,
utilization, disposal, management, release or location of which on, under or
from the Premises is prohibited or otherwise regulated pursuant to any of the
Environmental Laws;
(vii) "Premises" shall mean all locations listed
on Schedule 2.9 of the Disclosure Schedule.
(viii) "RCRA" shall mean the Solid Waste Disposal
Act, as amended by the Resource Conservation and Recovery Act of 1976 and
Hazardous and Solid Waste Amendments of 1984, 42 USC 6901 et seq., and any
future amendments; and
(ix) "Release" shall mean any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, or disposing into the indoor or outdoor environment,
including, without limitation, the abandonment or discarding of barrels,
drums, containers, tanks, and other receptacles containing or previously
containing any Hazardous Substances.
2.10 Accounts Receivable. All accounts and notes receivable of the
Company shown on the Balance Sheet and all accounts and notes receivable
acquired by the Company subsequent to the Balance Sheet Date have arisen in
the ordinary course of business and have been collected, or are in the
process of collection in the ordinary course of business in the aggregate
recorded amounts thereof. Seller makes no representation as to the
collectibility of any of the Company's accounts and notes receivable other
than as set forth in Section 4.11 of this Agreement and on Schedule 4.11 of
the Disclosure Schedule.
2.11 Inventories. All Inventories (as defined below) of the Company
are of a quality usable and saleable in the ordinary course of business,
determined in accordance with GAAP. Items included in such Inventories are
carried on the books of the Company, and are valued on the Balance Sheet at
their last invoice prices and, as to finished goods, plus the product of (X)
$4.00 per pound, multiplied by (Y) the amount (in pounds) of such finished
goods. The term "Inventories" means all stock of raw materials,
work-in-process and finished goods, including but not limited to finished
goods purchased for resale, held by the Company for manufacturing, assembly,
processing, finishing, sale or resale to others, from time to time in the
ordinary course of business of the Company in the form in which such
inventories then are
8
held or after manufacturing, assembling, finishing, processing, incorporating
with other goods or items, refining or the like. All special formula products
or special label products on hand as of the Closing Date are saleable in the
ordinary course of business.
2.12 Fixed Assets. Schedule 2.12 of the Disclosure Schedule sets
forth a list of all Fixed Assets (as defined below) used in the Company's
business as of December 31, 1999, including a description and the book value
thereof. All of the Fixed Assets are in good operating condition and repair,
normal wear and tear excepted, and are adequate for the uses to which they
are being put, and none of the Fixed Assets is in need of maintenance or
repairs, except for ordinary, routine maintenance and repairs that are not
material in nature or cost. The term "Fixed Assets" means machinery,
equipment, tooling, production fixtures, maintenance machinery and equipment,
furniture, leasehold improvements and construction in progress owned by the
Company, or used exclusively by the Company in the conduct of its business
and located at the Facility, including those items set forth on Schedule
2.12). All of the Fixed Assets are located at the Facility.
2.13 Customers and Suppliers.
(a) Schedule 2.13 of the Disclosure Schedule identifies all
customers of the Company included in the Company's Access database, and all
trade suppliers of Seller or the Company since April 1999 which accounted for
purchases, individually or in the aggregate, by the Company in excess of
$5,000 per supplier. Except as set forth on Schedule 2.13, to the knowledge
of Seller and the Company, the Company has good relations with its customers
and suppliers; no customer has advised Seller or the Company that it will not
purchase any products or services from the Company in the future or that it
wishes to return any products previously purchased from the Company; and no
supplier has advised Seller or the Company that such supplier will not sell
materials or products to the Company in the future.
(b) Schedule 2.13 of the Disclosure Schedule identifies all
of the Company's open purchase orders as of the day preceding the Closing
Date.
(c) Schedule 2.13 of the Disclosure Schedule sets forth the
true, correct and complete copy of the Company's standard form terms and
conditions of sale.
(d) No outstanding purchase commitments by the Company are
in excess of the normal, ordinary and usual requirements of the Company.
2.14 Governmental Authorizations. Schedule 2.14 of the Disclosure
Schedule sets forth a true, correct and complete list, of all governmental
permits, licenses, franchises, concessions, zoning and other variances,
certificates, consents, clearances, exemptions and other approvals,
authorizations and orders (collectively "Permits") applicable to the Company,
including without limitation all Permits required by applicable Environmental
Laws with respect to the Company's operations at the Premises. All such
Permits are presently in full force and effect, the Company is in material
compliance with the requirements thereof and no suspension or cancellation of
any of them is threatened so far as is known to Seller. The Company has all
such Permits as are necessary to conduct its business as such business is
conducted as of the date of this Agreement. Except for those consents or
notices described in Schedule 2.2 of the Disclosure Schedule, to the
knowledge of Seller and the Company, the sale of the Shares as contemplated
hereby will not adversely affect the validity or effectiveness of, and will
not require, for retention thereof after such sale, the consent or approval
of any party to, or any other person or governmental authority having
jurisdiction of, any such Permit.
9
2.15 Intellectual Property. The Company owns, or is licensed to use,
or otherwise has the right to use all patents, trademarks, service marks,
trade names, trade secrets, franchises, and copyrights, and all applications
for any of the foregoing, and all technology, know-how and processes
necessary for the conduct of its businesses as now conducted (collectively,
the "Proprietary Rights"). With respect to the Company's Proprietary Rights:
(a) All license arrangements relating in any manner to any
of the Proprietary Rights (whether or not in writing) are set forth on
Schedule 2.15(a) of the Disclosure Schedule. Except as disclosed in such
Schedule 2.15(a), the Company is in compliance with and is not in default
under any of such license agreements, and, to the knowledge of Seller and the
Company, all other parties to any of such license agreements are in full
compliance with and are not in default under any of the license agreements.
(b) Schedule 2.15(b) of the Disclosure Schedule sets forth
a complete list of all patents, trademarks and service marks used by the
Company in the conduct of its business that are currently registered in any
jurisdiction, and the Company has good and marketable title to all such
assets free and clear of all liens, charges and encumbrances (except for such
license agreements listed in Schedule 2.15(a)) and all filing or maintenance
fees that are required to maintain such registrations that are due and
payable as of the date of this Agreement have been paid and all associated
maintenance filings have been made.
(c) Schedule 2.15(c) of the Disclosure Schedule sets forth
a complete list of all unregistered trademarks, service marks, and trade
names used by the Company in the conduct of its business, and the Company has
good and marketable title to all such assets free and clear of all liens,
charges and encumbrances (except for such license agreements listed in
Schedule 2.15(a)).
(d) Schedule 2.15(d) of the Disclosure Schedule sets forth
a complete list of all software that the Company has had written or developed
by any person or entity not an employee of the Company (other than
prepackaged, "off-the-shelf" software packages), lists the current owner of
the copyright interest in such software, and if the Company is the current
owner, lists the date of the written assignment of the copyright interest to
the Company.
(e) To the knowledge of Seller and the Company, except as
disclosed in Schedule 2.15(e) of the Disclosure Schedule, the Company has not
infringed, misappropriated, or otherwise used in an unauthorized manner the
proprietary rights (including but not limited to the patent, trade secret,
trademark, trade dress, or copyright rights) of any third party.
(f) Neither Seller nor the Company has granted or committed
to grant any rights in the Company's Proprietary Rights of any nature
whatsoever to any third party except as disclosed in Schedule 2.15(f) of the
Disclosure Schedule;
(g) Except as disclosed in Schedule 2.15(g) of the
Disclosure Schedule, no claim has been asserted by any person or entity (i)
to the effect that any action by the Company infringes on the intangible or
intellectual property rights of any other person or entity; or (ii) that
challenges or questions the right of the Company to use any of the
Proprietary Rights being used by it; or (iii) which asserts the right of any
third party to use such Proprietary Rights.
(h) Neither Seller nor the Company has any knowledge that
any other person or entity is infringing upon or has misappropriated any of
the Company's Proprietary Rights.
10
2.16 Insurance. Schedule 2.16 of the Disclosure Schedule sets forth
a complete list of all of the general liability, fire, property damage,
workers compensation, employer's liability and other insurance policies held
by the Company or by Seller on its behalf, together with a list the names and
addresses of all brokers and agents through which such policies were
purchased. The Company is current in the payment of all premiums due on such
insurance and the Company has not failed to give any notice or present any
claim thereunder in due and timely fashion. To the knowledge of Seller and
the Company, no basis exists which would jeopardize the coverage under any
such insurance.
2.17 Employee Relations. Schedule 2.17 of the Disclosure Schedule
sets forth a list of all of the officers, employees and agents of Company
and, for each individual, indicates his or her position, salary or wage rate
and respective fringe benefits and any other remuneration paid or payable.
Except as disclosed on such Schedule 2.17:
(a) There is not now in existence or pending, nor has there
been within the last three years, any grievance, arbitration, administrative
hearing, claim of unfair labor practice, wrongful discharge, employment
discrimination or sexual harassment or other employment dispute of any nature
pending or, to the knowledge of the Seller and the Company, threatened
against the Company.
(b) The Company has no collective bargaining agreements and
is not a party to any written or oral, express or implied, other contract,
agreement or arrangement with any labor union or any other similar
arrangement that is not terminable at will by the Company without cost,
liability or penalty.
(c) The Company is not a party to any written or oral
contract, agreement or arrangement with any of its present or former
directors, officers, employees or agents that is not terminable at will by
the Company with respect to length, duration or conditions of employment (or
the termination thereof), salaries, bonuses, percentage compensation,
deferred compensation or any other form of remuneration, or with respect to
any matter not disclosed on Schedule 2.17(c) of the Disclosure Schedule.
Except as described on such Schedule 2.17(c), there is no claim pending or,
to the knowledge of the Seller and the Company, threatened against the
Company for violation of any of such contracts, agreements or arrangements.
(d) Upon termination of the employment of any of the
Company's employees on or after the Closing Date, the Company shall not incur
any liability for severance or termination pay or any other obligation to the
Company's employees or to any person, entity or government other than
pursuant to the Company's or Buyer's employment policies established on or
after the Closing Date.
2.17A Employee Benefit Plans.
(a) Schedule 2.17A(a) of the Disclosure Schedule sets forth
all "employee pension benefit plans", "employee welfare benefit plans" and
"multi-employer plans" within the respective meanings of Sections 3(1) and
3(2) and 3(37) of the Employment Retirement Income Security Act of 1974, as
amended ("ERISA"), all incentive compensation plans, benefit plans for
retired employees and all other employee benefit plans maintained by the
Company or by the Seller for the benefit of employees of the Company, or to
which Seller or the Company has made payments or contributions on behalf of
the Company's employees since December 24, 1979, including, without
limitation, all plans or contracts providing for bonuses, pensions,
profit-sharing, stock options, stock purchase rights, deferred compensation,
insurance and retirement benefits of any nature, whether formal or informal
(each such plan is referred to individually as a "Plan", collectively as the
"Plans").
(b) Except for any multi-employer plans, all Plans covered
by the Code and ERISA are, and during all applicable limitation periods have
been, in compliance with the Code and ERISA, and
11
all retirement or pension Plans and welfare benefit Plans are qualified plans
under the Code and each Plan is in compliance with the applicable provisions
of the Code.
(c) There has been no transaction involving a Plan in
connection with which the Company or any of its directors, agents, officers,
or employees could be subject to either a civil penalty assessed pursuant to
Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code or any
similar provision of foreign law.
(d) Except as set forth on Schedule 2.17A(d) of the
Disclosure Schedule, no Plan that is a qualified plan under Section 401(a) of
the Code and no trust created thereunder has been terminated, partially
terminated, curtailed, discontinued or merged into another plan or trust,
except in compliance with notice and disclosure to the Internal Revenue
Service ("IRS"), the Department of Labor and the Pension Benefit Guaranty
Corporation ("PBGC"); and any such termination, partial termination,
curtailment, discontinuance or merger has been accompanied by the issuance of
a current favorable determination letter by the IRS and, where applicable,
has been accompanied by plan termination proceedings with and through the
PBGC.
(e) There are no payments that have become due from any
Plan, the trusts created thereunder, or from Seller or the Company which have
not been paid through normal administrative procedures to the Plan
participants or beneficiaries entitled thereto.
(f) Seller or the Company has made full and timely payment
of all required and discretionary contributions to the Plans, and no unfunded
liability exists with respect to any Plan.
(g) There has been no "reportable event" as defined in
Section 4043 of ERISA with respect to any Plan or any trust created
thereunder.
(h) None of the Plans is a "defined benefit plan" within
the meaning of Section 3(35) of ERISA and none is subject to Title IV of
ERISA.
(i) Seller, the Company and all of their current or former
directors, officers, employees, or agents do not have any outstanding
liabilities of any nature to the PBGC, the IRS, or the Department of Labor in
any way relating to the Plans, and all annual returns required to be filed
with respect to the Plans have been timely filed.
(j) Neither Seller nor the Company is a party to or
otherwise subject to any express or implied agreement or plan to provide
health coverage or other benefits to current or former employees of the
Company except as set forth in Schedule 2.17A(j) of the Disclosure Schedule.
(k) Except as set forth on Schedule 2.17A(k) of the
Disclosure Schedule, neither Seller nor the Company is a party to or
otherwise subject to any express or implied agreement or plan to provide any
employee benefits, wages, deferral compensation, or any other form of benefit
or remuneration to current or former employees of the Company beyond the
Closing Date.
(l) With respect to all of its employees, former employees
and qualified beneficiaries as of the Closing Date, the Company has complied
with all applicable health care continuation requirements under the
Consolidated Omnibus Budget Reconciliation Act of 1986, as amended, and the
regulations thereunder (collectively, "COBRA").
12
2.18 Agreements and Documents. Seller has previously furnished or
made available to Buyer true, correct and complete copies of each document
that is referred to in this Section 2.18, all of which are listed in Schedule
2.18 of the Disclosure Schedule:
(a) each document related to interests in real property
owned, leased or otherwise used or claimed by the Company;
(b) (i) each agreement of the Company which involves
aggregate future payments by or to the Company of more than $10,000 or any
agreement whose term extends beyond one year after the date hereof; and (ii)
each agreement containing any covenant restricting the freedom of the Company
to compete in any line of business or with any person;
(c) all employment or similar compensation agreements of
the Company which may not be terminated by the Company without penalty within
thirty days after the Closing;
(d) all bonus, incentive compensation, deferred
compensation, profit-sharing, stock option, retirement, pension, severance,
indemnification, insurance, death benefit or other fringe benefit plans,
agreements or arrangements of the Company (or applying to the Company) in
effect, or under which any amounts remain unpaid, on the date hereof or to
become effective after the date hereof;
(e) each agreement or other instrument or arrangement
defining the terms on which any indebtedness of the Company (or a guarantee
by the Company of indebtedness) is or may be issued;
(f) the names and addresses of all banks in which the
Company has accounts or lines of credit, and with respect to each such
account or line of credit, the account numbers thereof and the names of all
persons authorized to drawn thereon;
(g) all agency, distributor, sales representative and
similar agreements relating primarily to the business of the Company;
(h) all licenses or similar agreements of the Company with
respect to patents, trademarks, copyrights, or other intellectual property;
and
(i) all non-competition, inventions assignment and
non-disclosure agreements with the current employees of the Company and all
such agreements in the possession of the Company with former employees of the
Company
The Company is not a party to any oral contract or
agreement which would be required to have been furnished or made available to
Buyer under this Section had such contract or agreement been committed to
writing.
There is no default or breach, or claimed or purported or
alleged default or breach, or, to the knowledge of Seller and the Company,
basis on which with notice or lapse of time or both, a default or breach
would exist, in any obligation on the part of any party (including the
Company) to be performed under any lease, contract, plan, policy or other
instrument or arrangement referred to in this Section, and, upon the Company
obtaining the Required Consents, none will arise upon the purchase and sale
of the Shares as contemplated by this Agreement that would give rise to a
right to terminate such agreement on the part of the other party.
2.19 No Changes. Except as set forth on Schedule 2.19 of the
Disclosure Schedule, since the Balance Sheet Date there has not been:
13
(a) any adverse change in the business, financial condition
or assets of the Company;
(b) any damage, destruction or loss (whether or not covered
by insurance) adversely affecting the business of the Company;
(c) any declaration, setting aside or payment of any
dividend, or other distribution, in respect of any capital stock of the
Company or any direct or indirect redemption, purchase or other acquisition
of such stock;
(d) any employment or deferred compensation agreement
entered into between the Company and any of its officers, directors,
employees or consultants;
(e) any labor union activity (including without limitation
any negotiation, or request for negotiation, with respect to any union
representation or any labor contract) respecting the Company;
(f) any mortgage, lien, attachment, pledge, encumbrance or
security interest created on any asset of the Company, or assumed by the
Company with respect to any such assets, except for liens permitted under
Section 2.8;
(g) any indebtedness or other liability or obligation
incurred, or other transaction engaged in, by the Company, except those in
the ordinary course of business and except for the sale of the Shares as
contemplated by this Agreement;
(h) any obligation or liability discharged or satisfied by
the Company, except items included in current liabilities shown on the
Balance Sheet and current liabilities incurred since the Balance Sheet Date
in the ordinary course of business;
(i) any sale, assignment, lease, transfer or other
disposition of any asset of the Company, except in the ordinary course of
business;
(j) any adverse amendment, termination or waiver of any
right belonging to the Company; or
(k) any increase in the compensation or benefits payable or
to become payable by the Company to any of its officers or employees;
(l) any change with respect to the manner of conducting it
business or with respect to its method of accounting; or
(m) any commitment, contract, agreement, license, lease or
transaction entered into other than in the ordinary course of business.
2.20 Litigation or Proceedings. Except as set forth on Schedule 2.20
of the Disclosure Schedule, the Company is not engaged in, or a party to, or,
to the knowledge of Seller and the Company, threatened with, any claim or
legal action or other proceeding before any court, any arbitrator of any kind
or any governmental authority. No basis for any such claim or legal action or
other proceeding or governmental investigation exists based on any action or
inaction of the Company since January 31, 1997. There are no orders, rulings,
decrees, judgments or stipulations to which the Company is a party by or with
any court, arbitrator or governmental authority affecting the Company.
14
2.21 Compliance with Laws. The Company (i) is in material compliance
with all federal, state, local or foreign laws, ordinances, regulations,
rules or orders applicable to it, including without limitation, (A) federal,
state, local or foreign laws, executive orders and regulations respecting
employment and employment practice, terms and conditions of employment,
occupational safety, wages and hours and (B) all applicable Environmental
Laws; (ii) has not received any complaint from any governmental authority,
and, to the knowledge of Seller and the Company, none is threatened, alleging
that the Company has violated any such law, ordinance, regulation, rule or
order; and (iii) has not received any notice from any governmental authority
of any pending proceedings to take all or any part of the properties of the
Company by condemnation or right of eminent domain and, to the knowledge of
Seller and the Company, no such proceeding is threatened. Without limiting
the generality of the foregoing, the Company is in material compliance with
all current applicable laws, regulations, rules and orders administered or
issued by the U.S. Food and Drug Administration ("FDA"). The Company has
provided to Buyer copies of all 483 forms, warning letters related to Good
Manufacturing Practice ("GMP") violations, and FDA establishment inspection
reports it has available, together with the Company' s responses thereto to
FDA, as set forth on Schedule 2.21 of the Disclosure Schedule. Schedule 2.21
of the Disclosure Schedule sets forth a general description of the Company's
GMP and FDA documentation, copies of which have previously been provided or
made available to Buyer.
2.22 Brokers and Finders. Neither Seller nor the Company has
employed any broker, agent or finder or incurred any liability on behalf of
Buyer or the Company for any brokerage fees, agents' commissions or finders'
fees in connection with the transactions contemplated hereby.
2.23 Warranties and Product Liability. Schedule 2.23 of the
Disclosure Schedule sets forth a true and correct list and description of all
outstanding standard product warranties and guaranties given by the Company
with respect to its business and all other product warranties and guaranties
now in effect with respect to products manufactured or sold by the Company.
Except as described in Schedule 2.23 of the Disclosure Schedule, there are no
pending claims or actions against the Company for breach of warranty or based
upon product liability (whether based on tort or contract principles) and, to
the knowledge of Seller and the Company, no such claims or actions are
threatened. There are no defects in craftsmanship, design or engineering with
respect to any product now or previously sold or manufactured by the Company
which may constitute the basis for any such claim against the Company. All
products previously sold by the Company were (a) free from defects in
materials and workmanship and (b) sold prior to the expiration of their
stated shelf life.
2.24 Disclosure. No representation or warranty by Seller or Company
contained in this Agreement and no statement contained in the Schedules or
any other document, certificate or other instrument delivered or to be
delivered at the Closing by or on behalf of Seller and Company pursuant to
this Agreement contains any untrue statement of a material fact or omits to
state any material fact necessary, in light of the circumstances under which
it was or will be made, in order to make the statements herein or therein not
misleading.
2.25. Certain Non-Compete Agreements. Dale A. Williams, Sr. has
reaffirmed his obligations under his Non-Compete Agreement dated January 30,
1997 with Seller and his Invention and Non-Disclosure Agreement dated January
30, 1997 with Seller pursuant to the letter agreement dated March 9, 1999
between Seller and Mr. Williams, and such agreements continue in full force
and effect in accordance with their respective terms. Leslie V. Cunningham
has reaffirmed his obligations under his Non-Compete Agreement dated January
30, 1997 with Seller and his Invention and Non-Disclosure Agreement dated
January 30, 1997 with Seller pursuant to the letter agreement dated April 16,
1999 between Seller and Mr. Cunningham, and such agreements continue in full
force and effect in accordance with their respective terms. To the knowledge
of Seller and the Company, neither Dale A. Williams, Sr.
15
nor Leslie V. Cunningham is in default or has any current plan to default
under any obligation under his respective Non-Compete Agreement and Invention
and Non-Disclosure Agreement with Seller.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows.
3.1 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan and has
full corporate power and authority to own and operate its assets and to carry
on its business as now being conducted.
3.2 Authority. Buyer has full right, power, capacity and authority
to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action on
the part of Buyer. This Agreement has been duly and validly executed and
delivered by Buyer and constitutes the valid and binding obligation of Buyer,
enforceable against it in accordance with the terms hereof. Neither the
execution, delivery and performance of this Agreement nor the consummation of
the transactions contemplated hereby will (i) conflict with or result in a
violation, breach, termination or acceleration of, or default under (or would
result in a violation, breach, termination, acceleration or default with the
giving of notice or passage of time, or both) any of the terms, conditions or
provisions of the Certificate of Incorporation or By-laws of Buyer, as
amended, or of any note, bond, mortgage, indenture, license, agreement or
other instrument or obligation to which Buyer is a party or by which Buyer or
any of its properties or assets may be bound or affected; (ii) result in the
violation of any order, writ, injunction, decree, statute, rule or regulation
applicable to Buyer or any of its properties or assets; or (iii) result in
the imposition of any lien, encumbrance, charge or claim upon any of its
assets. No consent or approval by, or notification to or filing with, any
court, governmental authority or third party is required in connection with
the execution, delivery and performance of this Agreement by Buyer or the
consummation of the transactions contemplated hereby.
3.3 Brokers and Finders. Buyer has not employed any broker, agent or
finder or incurred any liability on behalf of the Company or Seller for any
brokerage fees, agents' commissions or finders' fees in connection with the
transactions contemplated hereby.
3.4 Due Diligence. Buyer and its representatives have been afforded
access to the books, records and premises of the Company and have been given
the opportunity to meet with officers, employees and other representatives of
the Company for the purpose of obtaining information with respect to the
business of the Company in order to determine whether to proceed with the
transactions contemplated by this Agreement.
3.5 Accredited Investor. Buyer is an "accredited investor," as such
term is defined in Rule 501 of Regulation D promulgated pursuant to the
Securities Act of 1933, as amended.
ARTICLE 4
COVENANTS AND AGREEMENTS
4.1 Expenses. Buyer and Seller shall bear their respective expenses
incurred in connection with the preparation, execution and performance of
this Agreement and the transactions contemplated hereby, including without
limitation, all fees and expenses of agents, representatives, counsel and
16
accountants. All federal, state and local sales, transfer or similar taxes
required to be paid in respect of the transfer of the Shares shall be paid by
Buyer.
4.2 Further Assurances. Each of the parties shall execute such
documents, further instruments of transfer and assignment and other papers
and take such further actions as may be reasonably required or desirable to
carry out the provisions hereof and the transactions contemplated hereby.
4.3 Public Announcements and Confidentiality. Any press release or
other information to the press or any third party with respect to this
Agreement or the transactions contemplated hereby shall require the prior
approval of Buyer and Seller, which approval shall not be unreasonably
withheld; provided, however, that a party shall not be prevented from making
such disclosure as it shall be advised by counsel is required by law.
4.4 Noncompetition Agreement.
(a) Undertaking. Seller for itself and its affiliates
agrees that neither it nor any of its affiliates will directly or indirectly,
anywhere in the United States of America or any other country of the world:
(i) for a period of five (5) years after the
Closing Date, as an individual proprietor, partner, stockholder, officer,
employee, director, joint venturer, investor, lender, or in any other
capacity whatsoever (other than as the holder of not more than two percent
(2%) of the total outstanding stock of a publicly held company), engage in
the business of developing, producing, marketing or selling bulk dehydrated
culture media products of the kind or type marketed or sold by the Company
before the Closing Date (provided, however, that nothing contained herein
shall limit Seller or its affiliates from developing, producing, marketing or
selling products of the kind or type currently marketed or sold by Seller
before the Closing Date, including without limitation its existing
SimPlate(TM) products and water testing products); or
(ii) for a period of three (3) years after the
Closing Date, recruit, solicit or induce, or attempt to induce, any employee
or employees of the Company to terminate their employment with, or otherwise
cease their relationship with, the Company.
(b) Interpretation and Remedies. The parties hereto agree
that the duration, geographic scope and ambit of the noncompetition provision
set forth in this Section 4.4 are reasonable. In the event that any court of
competent jurisdiction determines that the duration, the geographic scope,
the ambit, or any of the foregoing, are unreasonable and that such provision
is to that extent unenforceable, the parties hereto agree that the provision
shall remain in full force and effect for the greatest time period, in the
greatest area and to the greatest extent that would not render it
unenforceable. The parties intend that this noncompetition provision shall be
deemed to be a series of separate covenants, one for each and every county of
each and every state of the United States of America and each and every
political subdivision of each and every country outside the United States of
America where this provision is intended to be effective. If Seller breaches
or threatens to breach this Section 4.4, Seller agrees that Buyer shall be
entitled to an injunction restraining such breach. Nothing contained in this
Section 4.4 shall be construed to preclude Buyer from pursuing any other or
additional remedies available to it for such breaches, including monetary or
other remedies available at law or equity.
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4.5 Confidentiality of Information.
(a) Seller agrees that (i) all current and future
non-public information regarding the Company is confidential and proprietary
information about the Company ("Confidential Information") and (ii) it will
not disclose, directly or indirectly, such Confidential Information or use it
for any purpose other than for the benefit of Buyer or the Company. The
obligations of confidentiality in this Section 4.5 shall not apply to any
information which (i) was known to the public prior to receipt by Seller;
(ii) is or becomes generally available to the public other than as a breach
of this Agreement by Seller; (iii) is disclosed to Seller by a third party
having a legal right to make such disclosure; or (iv) is required to be
disclosed in compliance with applicable law or legal process. The obligations
under this Section 4.5 shall terminate on the fifth anniversary of the
Closing Date.
(b) The parties agree that if Seller uses any of the
Company's Confidential Information or if Seller otherwise discloses any such
Confidential Information to any other person, entity or organization, that
improper use or disclosure may have a devastating and serious impact on the
Company's ability to successfully compete and may, therefore, result in
immediate and irreparable injury, loss or damage to the Company. The parties
agree that in such event, in addition to Buyer's right to recover damages for
a breach of this Agreement, Buyer shall be entitled to obtain a temporary
restraining order or a preliminary injunction from a court of competent
jurisdiction to prevent Seller, its consultants or independent contractors
from engaging in any further use or disclosure of any Company's Confidential
Information.
4.6 Tax Matters. The following provisions shall govern the
allocation of responsibility as between Buyer and Seller for certain tax
matters following the Closing Date:
(a) Tax Periods Ending on or Before the Closing Date.
Seller shall prepare or cause to be prepared and file or cause to be filed
all Tax Returns for the Company for all periods ending on or prior to the
Closing Date which are required to be filed after the Closing Date, including
income Tax Returns described in Subsection 4.6(c) with respect to periods for
which a consolidated, unitary or combined income Tax Return of Seller will
include the operations of the Company. Seller shall provide a copy to Buyer
of any such returns upon completion and filing of same. Seller shall pay all
Taxes associated with these Tax Returns.
(b) Tax Periods Beginning Before and Ending After the
Closing Date. Buyer shall prepare or cause to be prepared and file or cause
to be filed any Tax Returns of the Company for Tax periods that begin before
the Closing Date and end after the Closing Date. Buyer shall provide a copy
to Seller of any such returns upon completion and filing of same. Buyer shall
pay all Taxes associated with these Tax Returns; provided, however, that
Seller shall reimburse Buyer for the amount of Tax that would have been due
for the portion of any such Tax Period ending on the Closing Date, as though
such Tax Period had ended on the Closing Date. Seller agrees to provide Buyer
with all such information as Buyer may reasonably request to permit it to
file such Tax Returns, including a pro forma calculation of Maryland taxable
income for the Company with respect to the period from January 1, 2000
through the Closing Date.
(c) Consolidated, Combined and Unitary Income Tax Returns
for Periods Through the Closing Date. Seller will include the income (or
loss, if applicable) of the Company (including any deferred income triggered
into income by Reg. ss.1.1502-13 and Reg. ss.1.1502-14 and any excess loss
accounts taken into income under Reg. ss.1.1502-19) on the Seller
consolidated federal income Tax Returns for all periods through the Closing
Date and pay any federal income Taxes attributable to such income. Further,
Seller will include the income (or loss, if applicable) of the Company on the
Seller consolidated, combined, or unitary state income Tax Returns for all
periods through the Closing Date and pay any Taxes attributable to such
income. The Company will furnish Tax information to Seller for
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inclusion in Seller's federal and state income Tax Returns for the period
which includes the Closing Date in accordance with the Company's past custom
and practice. The income (or loss, if applicable) of the Company will be
apportioned to the period up to and including the Closing Date and the period
after the Closing Date by closing the books of the Company as of the end of
the Closing Date.
(d) Refunds and Tax Benefits. Any Tax refunds that are
received by Buyer or the Company, and any amounts (excluding reductions in
tax liability arising from the utilization of income tax net operating loss
carryforwards or tax credits) credited against Tax to which Buyer or the
Company become entitled, that relate to Tax periods or portions thereof
ending on or before the Closing Date shall be for the account of Seller, and
Buyer shall pay over to Seller any such refund or the amount of any such
credit or other tax liability reduction within fifteen (15) days after
receipt thereof or entitlement thereto. Buyer and the Company agree to
provide adequate information in order to meet the requirements of this
Subsection 4.6(d). Seller makes no representation as to any net operating
loss carryforwards, including without limitation as to their validity or
utility.
(e) Cooperation on Tax Matters.
(i) Buyer and the Company on the one hand, and
Seller on the other hand, shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the filing of Tax
Returns pursuant to this Section and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) provision of records and
information which are reasonably relevant to any such audit, litigation or
other proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any material
provided hereunder. Each of Buyer and Seller agrees to retain all books and
records with respect to Tax matters pertinent to the Company relating to any
taxable period beginning before the Closing Date until the expiration of the
applicable statute of limitations (and, to the extent notified by Buyer or
Seller, any extensions thereof) of the respective taxable periods, and to
abide by all record retention agreements entered into with any taxing
authority.
(ii) Each of Buyer and Seller agrees, upon request
from the other, to use its commercially reasonable efforts to obtain any
certificate or other document from any governmental authority or any other
person as may be necessary to mitigate, reduce or eliminate any Tax that
could be imposed (including, but not limited to, with respect to the
transactions contemplated by this Agreement).
(iii) Each of Buyer and Seller agrees, upon
request from the other, to provide the other with all information that it may
be required to report pursuant to ss.6043 of the Code and all Treasury
Department Regulations promulgated thereunder.
(f) Tax Sharing Agreements. All tax sharing or similar
agreements with respect to or involving the Company are hereby terminated and
of no further force or effect as of the Closing Date for any taxable year
(whether the current year, a future year, or a past year), and the Company is
not bound thereby nor after the Closing shall it have any liability
thereunder.
(g) Certain Taxes. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any penalties
and interest) incurred in connection with this Agreement shall be paid by
Buyer when due, and Buyer will, at its own expense, file all necessary Tax
Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other Taxes and fees. If
required by applicable law, Seller will, and will cause its affiliates to,
join in the execution of any such Tax Returns and other documentation.
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(h) Taxes of Other Persons. Seller shall indemnify
and defend Buyer for all Damages suffered by Buyer as a result of any
liability of the Company for Taxes of any person other than the Company under
Reg.ss.1.1502-6 (or any similar provision of state, local or foreign law).
(i) Definitions. Capitalized terms used in this
Section which are not otherwise defined have the respective meanings ascribed
to them as follows:
"Code" has the meaning set forth in Section
2.7 of this Agreement.
"Damages" has the meaning set forth in Section
5.7 of this Agreement.
"Reg." means Treasury Department Regulations
promulgated under the Code.
"Tax" has the meaning set forth in Section 2.7
of this Agreement.
"Tax Return" means any return, declaration,
report, claim for refund, or information return or statement relating to
Taxes, including any schedule or attachment thereto, and including any
amendment thereof.
4.7 Audit of Company Financial Statements. Seller acknowledges that
Buyer desires to have the Company's financial statements for the year ended
December 31, 1999 audited by Seller's independent public accountants, or
other mutually acceptable independent public accountants, within 60 days
after the Closing Date. Buyer shall bear the first $10,000 of the cost of any
such audit, and Seller shall pay the balance of such cost, if any. Seller and
Buyer agree to use reasonable efforts to cooperate to facilitate such audit.
4.8 Employee Benefit Policies and Programs.
(a) Buyer shall allow all employees of the Company as of
the Closing Date ("Employees") to enroll in Buyer's group medical and
hospitalization plans effective as of the Closing Date. Such Employees shall
not be subject to any waiting periods for participation or pre-existing
condition limitations in such plans.
(b) Buyer shall grant all Employees credit for all service
with the Company or Seller prior to the Closing for all purposes (i) with
respect to Buyer's vacation policies and (ii) under Buyer's flexible spending
account plan. Buyer shall also, or shall cause the Company to, reimburse Dr.
Rex Hamilton for any relocation expenses incurred on or after the Closing
Date in accordance with Buyer's policies, in an amount up to $20,000 less
amounts previously reimbursed by Seller or the Company, for Dr. Hamilton's
relocation expenses incurred before the Closing Date.
(c) The Company shall not maintain any of the Seller Plans
after the Closing, and Seller shall promptly after Closing remove the Company
as a participating employer in the Plans, effective as of the Closing Date.
Seller shall be responsible under the Plans for benefits claims made by
former Employees under the Plans after the Closing Date, including without
limitation making available COBRA health care continuation benefits to former
Employees and their qualified beneficiaries who elect such benefits.
4.9 Sharing of Data. Seller shall have the right for a period of
five years following the Closing Date to have reasonable access to such
books, records and accounts, including financial and tax information,
correspondence, production records, employment records and other similar
information of the Company for the limited purposes of concluding its
involvement with the Company before the
20
Closing Date and for complying with its obligations under applicable
securities, tax, environmental, employment or other laws and regulations.
Buyer shall have the right for a period of five years following the Closing
Date to have reasonable access to those books, records and accounts,
including financial and tax information, correspondence, production records,
employment records and other records which are retained by Seller pursuant to
the terms of this Agreement to the extent that any of the foregoing relates
to the Company or is otherwise needed by the Buyer in order to comply with
its obligations under applicable securities, tax, environmental, employment
or other laws and regulations.
4.10 Transitional Use of Names.
(a) The Company may continue to use existing supplies of
invoices, packaging and promotional and sales materials bearing corporate
names, trade names and/or trademarks including the words "IDEXX" and "IDEXX
Laboratories" from the Closing Date through December 31, 2000, but shall use
reasonable efforts to ensure that its customers and clients are aware that
the Company is not owned by, and its products are no longer affiliated with,
Seller. Notwithstanding the foregoing, Seller may terminate such right upon
notice to Buyer if Seller determines that any products sold by the Company
after the Closing Date fail to conform to quality standards which are
consistent with the same level of the Company's practice prior to Closing.
(b) Seller may continue to use existing supplies of
corporate, promotional and sales materials bearing corporate names, trade
names and/or trademarks including the words "Acumedia" and Acumedia
Manufacturers" from the Closing Date through December 31, 2000, but shall use
reasonable efforts to ensure that the public, its customers and clients are
aware that the Company is not owned by, and its products are no longer
affiliated with, Seller.
(c) The rights granted by Sections 4.10(a) and (b) shall be
personal to the Company and Seller, respectively, and neither Seller, the
Company nor Buyer shall have any right to transfer, directly or indirectly,
any of such rights to any other person or entity.
(d) Except as expressly set forth, and to the extent set
forth, herein, no license is granted hereunder for the use of any trademark,
service mark or trade name owned by Seller or the Company, and no party shall
use any such trademark, service mark or trade name of the other (including
without limitation the names and trademarks referred to in this Section 4.10)
in any manner or for any purpose.
4.11 Guaranteed Receivables. Schedule 4.11 sets forth a
categorization of the accounts receivable of the Company existing on the day
before the Closing Date ("Closing A/R") into one of the following five
categories, as mutually agreed by Seller and Buyer: (1) collectible in full;
(2) slow, but collectible in full; (3) high risk; (4) bad debt; and (5)
disputed amount (regardless of the reason) ("Stratified Accounts
Receivable").
Closing A/R listed in Categories (1) and (2) of such Schedule 4.11
shall be transferred and assigned to Buyer at Closing without any
representation or warranty as to their collectibility, with the exception of
the following customers: PML Microbiologicals; Med-Ox Diagnostics, Inc.;
Binax and AKO (the "Guaranteed Category 2 Receivables"). With respect to
these customers, Buyer will use commercially reasonable efforts to collect
all Guaranteed Category 2 Receivables for 120 days after the Closing Date.
If, notwithstanding such efforts, such Guaranteed Category 2 Receivables have
not been collected within 120 days after the Closing Date, then Buyer shall
either elect to retain ownership of such Guaranteed Category 2 Receivables,
in which case Buyer shall accept them without any representation or warranty
as to collectibility, or shall cause the Company to assign any such
uncollected Guaranteed Category 2 Receivables to Seller. Buyer shall notify
Seller of its election within five days after such 120-
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day period; and if Buyer does not so notify Seller, it shall be deemed to
have elected to retain such receivables. If Buyer elects to assign any such
uncollected Guaranteed Category 2 Receivables to Seller, then Seller shall
reimburse Buyer, by wire transfer of immediately available funds, within five
business days after such assignment, the aggregate recorded amount thereof.
In such event, Buyer and the Company shall provide Seller with such access to
those books and records of the Company, and such other cooperation, as shall
be reasonably requested to permit Seller to collect such uncollected
Guaranteed Category 2 Receivables.
Closing A/R listed in Category (3) of such Schedule 4.11 shall be
transferred and assigned to Buyer at Closing (the "Guaranteed Category 3
Receivables"). Buyer will use commercially reasonable efforts to collect all
Guaranteed Category 3 Receivables for 60 days after the Closing Date. If,
notwithstanding such efforts, such Guaranteed Category 3 Receivables have not
been collected within 60 days after the Closing Date, then Buyer shall cause
the Company to assign any such uncollected Guaranteed Category 3 Receivables
to Seller, and Seller shall reimburse Buyer, by wire transfer of immediately
available funds, within five business days after such assignment, the
aggregate recorded amount thereof. In such event, Buyer and the Company shall
provide Seller with such access to those books and records of the Company,
and such other cooperation, as shall be reasonably requested to permit Seller
to collect such uncollected Guaranteed Category 3 Receivables.
Closing A/R listed in Categories (4) and (5) of such Schedule 4.11
will not be transferred to Buyer. Buyer and the Company shall provide Seller
with such access to those books and records of the Company, and such other
cooperation, as shall be reasonably requested to permit Seller to collect
Closing A/R listed in Categories (4) and (5).
Buyer will not offer to customers with Guaranteed Category 2
Receivables and Guaranteed Category 3 Receivables any pricing, discounts or
other concessions in order to collect such receivables. Buyer may apply
payments received from such customers as specifically directed by the
customer; however, Buyer will encourage such customers to apply any payments
received to the oldest invoice first, and in absence of any instructions from
customers to the contrary will apply any payments received to the oldest
invoice first.
In the event that Seller or Buyer party receives payments with
respect to accounts receivable belonging to the other, the receiving party
shall promptly transmit the payment to the other party. If a payment is
received which does not specify which party is the proper recipient of such
payment, and both parties have an account receivable from the payor, the
receiving party shall first make a reasonable inquiry, including contacting
the payor, in order to ascertain the account receivable to which the payment
was intended to apply. If, after such inquiry, the receiving party is unable
to determine to which account receivable the payment was intended to apply,
the payment shall be applied to the oldest account receivable which is
outstanding.
4.12 Transfer of Records and Materials. Upon the Closing, Seller
shall deliver to Buyer or the Company (i) all material relating to the
Company's MAS 90 product and (ii) the originals or true and correct
photocopies of all business records relating to the Company that are located
at the Facility. Within 20 days after the Closing Date, Seller shall deliver
to the Company the originals or true and correct photocopies of all other
business records relating to the Company wherever located, including
Westbrook, Maine. The term "business records" shall be interpreted very
broadly, including but not limited to sales material, customer lists,
prospect lists, costs, marketing information, supplies, catalogs, software
code and documentation (to the extent owned by the Company or permitted to be
transferred pursuant to this Agreement) and similar records. Seller shall
deliver all of such records in both hard copy and electromagnetically, if
available in such format.
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4.13 Telephone Calls. Until December 31, 2000, Seller agrees to (i)
maintain its 800-321-0207 telephone number ("800 Line"); and (ii) encourage
customers or others making inquiry regarding Company's products, on the 800
Line or otherwise, to call the Company at a telephone number to be supplied
by Buyer or the Company after the Closing.
4.14 Commercial Software. Promptly after Closing, Buyer shall
purchase, or shall cause the Company to purchase, a copy of the Microsoft
software applications (including without limitation MS Office) that are
installed on the personal computers at the Company's Facility (one copy for
each personal computer), and Buyer shall provide Seller copies of the paid
invoices for such software applications.
ARTICLE 5
INDEMNIFICATION
5.1 Indemnification by Seller. Seller shall indemnify and defend
Buyer for the full amount of all Damages (as defined in Section 5.7 below)
suffered by Buyer resulting from:
(a) the breach of any representation or warranty made by
Seller or the Company in or pursuant to this Agreement;
(b) any failure by Seller to perform any obligation or
comply with any covenant or agreement of Seller specified herein in this
Agreement or in any other document executed at the Closing;
(c) any claim (i) for wages or fringe benefits made by any
employee of the Company with respect to the period ending immediately
preceding the Closing Date; (ii) for severance payments or other liabilities
with respect to the termination of any employees of the Company by the
Company or Seller prior to the Closing Date; (iii) by any employee of the
Company against the Company, in its capacity as the employer of such
employee, arising out of any matter occurring or not occurring, as the case
may be, prior the Closing Date; and (iv) with respect to the injury or death
of any such employee arising out of events occurring prior to the Closing
Date;
(d) any claim (including, without limitation, claims
alleging death or injury to persons or damage to property), whether based in
tort, contract or otherwise resulting from or caused by any product sold, or
service provided, by the Company prior to the Closing Date; and
(e) any claim, whether based in tort, contract or
otherwise, which claim arises under, is based upon, or relates to any
Federal, state, local or foreign environmental law, that is based on any
facts occurring or not occurring, as the case may be, prior to the Closing
Date.
The parties agree that any claim for indemnification under
Section 5.1(a) that is simultaneously a claim pursuant to Section 5.1(b),
(c), (d) or (e) shall, for purposes of the limitations on indemnification set
forth in Section 5.2, be deemed to fall under Section 5.1(b), (c), (d) or
(e).
5.2 Limitations on Indemnification by Seller. Notwithstanding the
foregoing Section 5.1, the right of Buyer to indemnification shall be subject
to the following provisions:
(a) No indemnification shall be payable to Buyer by Seller
pursuant to Section 5.1(a) unless the total of all claims for indemnification
pursuant to Section 5.1(a) shall exceed $50,000 in the aggregate, whereupon
Buyer shall be entitled to recover the aggregate amount of such claims in
accordance with the terms hereof, and not just those claims in excess of the
foregoing amount. Individual claims involving Damages of less than $2,000
shall not be indemnified and shall not be applied in
23
determining whether the aggregate Damages exceed the foregoing threshold. No
such limitations shall apply to claims made by Buyer with respect to Sections
5.1(b), (c), (d) and (e) of this Agreement.
(b) No indemnification shall be payable to Buyer pursuant
to Section 5.1(a) for amounts in excess of 70% of the Purchase Price in the
aggregate. Notwithstanding the foregoing, such limitation shall not apply to
claims made by Buyer pursuant to Sections 5.1(b), (c), (d) and (e) of this
Agreement.
(c) No indemnification shall be payable to Buyer pursuant
to Section 5.1(a) with respect to any claim asserted by Buyer after the
second anniversary of the Closing Date (the "Termination Date"); provided,
however, that the foregoing shall not apply to claims resulting from any
breach of the representations and warranties contained in (i) Section 2.24,
as to which no indemnification shall be payable to Buyer with respect to any
claim asserted by Buyer after 12 months after the Closing Date; (ii) Section
2.20, as to which no indemnification shall be payable to Buyer with respect
to any claim asserted by Buyer after the third anniversary of the Closing
Date; (iii) Section 2.7, as to which no indemnification shall be payable to
Buyer with respect to any claim asserted by Buyer after six months after the
expiration of the applicable statute of limitations; or (iv) Sections 2.1,
2.2, 2.3, 2.4 or 2.8 (but, as to such Section 2.8, only as to claims with
respect to the good and marketable title to the assets and properties
reflected on the Balance Sheet or acquired by the Company since the date of
Balance Sheet Date), with respect to which Buyer shall be entitled to assert
claims without limitation as to time.
(d) No indemnification shall be payable to Buyer pursuant
to Section 5.1(c) with respect to any claim asserted by Buyer after the
Termination Date. Buyer shall be entitled to indemnification pursuant to
Sections 5.1(b), (d) and (e) without limitation as to time.
5.3 Indemnification by Buyer. Buyer and the Company, jointly and
severally, shall indemnify and defend Seller for the full amount of all
Damages suffered by Seller resulting from:
(a) the breach of any representation or warranty made by
Buyer in or pursuant to this Agreement;
(b) any failure by Buyer to perform any obligation or
comply with any covenant or agreement of Buyer specified herein or in any
other document executed at the Closing;
(c) any claim (i) for wages or fringe benefits made by any
employee of the Company with respect to the period commencing on the Closing
Date; (ii) for severance payments or other liabilities with respect to the
termination of any employees of the Company by the Company or Buyer on or
after the Closing Date (including any claim alleging the wrongful termination
of any such employee by the Company or Buyer on or after the Closing Date and
including any claim of constructive termination arising out of the
consummation of the transactions contemplated by this Agreement) to the
extent that the claim relates to a matter occurring or not occurring, as the
case may be, on or after the Closing Date; (iii) by any employee of the
Company against the Company, in its capacity as the employer of such
employee, arising out of any matter occurring or not occurring, as the case
may be, on or after the Closing Date; and (iv) with respect to the injury or
death of any such employee arising out of events occurring on or after the
Closing Date;
(d) any claim (including, without limitation, claims
alleging death or injury to persons or damage to property), whether based in
tort, contract or otherwise resulting from or caused by any product sold, or
service provided, by Buyer or the Company on or after the Closing Date; and
24
(e) any claim, whether based in tort, contract or
otherwise, which claim arises under, is based upon, or relates to any
Federal, state, local or foreign environmental law, that is based on any
facts occurring or not occurring, as the case may be, on or after the Closing
Date.
The parties agree that any claim for indemnification under
Section 5.3(a) that is simultaneously a claim pursuant to Section 5.3(b),
(c), (d) or (e) shall, for purposes of the limitations on indemnification set
forth in Section 5.4, be deemed to fall under Section 5.3(b), (c), (d) or
(e).
5.4 Limitations on Indemnification by Buyer. Notwithstanding the
foregoing Section 5.3, the rights of Seller to indemnification shall be
subject to the following provisions
(a) No indemnification shall be payable to Seller by Buyer
pursuant to Section 5.3(a) unless the total of all claims for indemnification
pursuant to Section 5.3(a) shall exceed $50,000 in the aggregate, whereupon
Seller shall be entitled to recover the aggregate amount of such claims in
accordance with the terms hereof, and not just those claims in excess of the
foregoing amount. Individual claims involving Damages of less than $2,000
shall not be indemnified and shall not be applied in determining whether the
aggregate Damages exceed the foregoing threshold. No such limitations shall
apply to claims made by Seller with respect to Sections 5.3(b), (c), (d) and
(e) of this Agreement.
(b) No indemnification shall be payable to Seller pursuant
to Section 5.3(a) for amounts in excess of 70% of the Purchase Price in the
aggregate. No such limitation shall apply to claims made by Seller with
respect to Sections 5.3(b), (c), (d) and (e) of this Agreement.
(c) No indemnification shall be payable to Seller pursuant
to Section 5.3(a) with respect to any claim asserted by Seller after the
Termination Date; provided, however, that the foregoing shall not apply to
claims resulting from any breach of the representations and warranties
contained in Sections 3.1 and 3.2, with respect to which Seller shall be
entitled to assert claims without limitation as to time.
(d) No indemnification shall be payable to Seller pursuant
to Section 5.3(c) with respect to any claim asserted by Seller after the
Termination Date. Seller shall be entitled to indemnification pursuant to
Sections 5.3(b), (d) and (e) without limitation as to time.
5.5 Notice; Defense of Claims.
(a) Promptly after receipt by any indemnified party of
notice of any claim, liability or expense to which the indemnification
obligations hereunder are reasonably likely to apply, such party shall give
notice thereof in writing to the other party (the "Indemnifying Party"). Such
notice shall state the information then available regarding the amount and
nature of such claim, liability or expense. Failure to give notice as
required pursuant to this Agreement shall not relieve the Indemnifying Party
of its indemnification obligations hereunder unless the failure to give
notice to the Indemnifying Party materially prejudices the Indemnifying
Party.
(b) The Indemnifying Party shall have the right,
exercisable upon written notice to the party demanding indemnification (the
"Indemnified Party") within 20 days after receiving the notice referred to in
Section 5.5(a), at its expense, to defend, contest, protest, settle and
otherwise control the resolution of any such claim, action or proceeding. The
Indemnifying Party shall keep the Indemnified Party apprised of developments
with respect to any such claim, action or proceeding, and the Indemnified
Party shall have the right to consult with the Indemnifying Party, and to
participate therein, subject to the Indemnifying Party's right of control
thereof, at the Indemnified Party's expense and with counsel selected by the
Indemnified Party. If the Indemnifying Party shall notify the Indemnified
Party that the
25
Indemnifying Party has elected to assume any such defense,
contest or protest, then the Indemnifying Party shall not be liable to the
Indemnified Party hereunder for any legal or other expense subsequently
incurred by the Indemnified Party in connection therewith.
(c) If the Indemnifying Party does not notify the
Indemnified Party of its election to defend any claim as provided in Section
5.5(b), then the Indemnified Party may defend, contest, protest, settle and
otherwise control the resolution of such claim, action or proceeding. The
Indemnified Party shall keep the Indemnifying Party apprised of developments
with respect to any such claim, action or proceeding, and the Indemnifying
Party shall have the right to consult with the Indemnified Party, and to
participate therein, subject to the Indemnified Party's right of control
thereof, at the Indemnifying Party's expense and with counsel selected by the
Indemnifying Party. If such event, then the Indemnified Party shall not be
liable to the Indemnifying Party hereunder for any legal or other expense
subsequently incurred by the Indemnifying Party in connection therewith.
5.6 Payment of Claims. All claims (other than claims made by third
parties which are the subject of a good faith dispute between the Indemnified
Party (or the Indemnifying Party) and any such third party) shall be paid or
otherwise satisfied by the Indemnifying Party within 60 days after notice
thereof is given by the Indemnified Party. The Indemnified Party shall not
off-set any Damages claimed by it against any amount the Indemnified Party
may then owe to the Indemnifying Party unless and until (i) the Indemnifying
Party has agreed in writing to such off-set or (ii) the Indemnifying Party
has obtained a nonappealable judgment from a court of competent jurisdiction
specifying the amount of such Damages.
5.7 Definition of Damages. An Indemnified Party shall be entitled to
recover the full amount of any liabilities, losses, debts, obligations,
monetary damages, fines, fees, penalties, deficiencies, expenses (including
amounts paid in settlement, interest obligations, court costs, the reasonable
costs of investigators, the reasonable fees and expenses of attorneys,
accountants, financial advisors or other experts, and other reasonable
expenses of litigation or administrative proceedings) incurred due to the
matter for which indemnification is sought, but any recovery shall be net of
any economic benefit to which the Indemnified Party is entitled due to such
liabilities, expenses, costs or loss, including, without limitation, (i) any
tax refund, reduction or benefit, (ii) any insurance proceeds to which the
Indemnified Party is entitled (including self-insured amounts) and (iii) any
warranty reimbursements (collectively, "Damages"). In no event shall any
Indemnified Party be awarded punitive or multiple damages, except with
respect to a breach of Section 2.25 of this Agreement (provided, that this
exception does not modify any of the limitations set forth in Section 5.2 of
this Agreement).
5.8 Limitation on Remedies. It is specifically understood and agreed
that, in the absence of fraud by any party hereto, in the event a
misrepresentation or breach of warranty or covenant is discovered by any
party after the Closing, such party's remedies shall be limited solely to the
indemnification set forth in this Article 5 of this Agreement.
5.9 Waiver of Claims. Seller waives any and all claims it has for
contribution or breach of contract against the Company arising out of this
Agreement for any breach of this Agreement by the Company. Any Damages
payable to Buyer as a result of this Agreement shall be paid solely by Seller
and not by the Company.
ARTICLE 6
MISCELLANEOUS
6.1 Notices. All notices, requests, demands, consents and other
communications which are required or permitted hereunder shall be in writing,
and shall be deemed given (a) when actually received, if by fax, (b) one day
after deposit with a nationally recognized air courier or express mail,
charges
26
prepaid, (c) on the date of delivery, if delivered in person, or (d) three
days after deposit in the U.S. mail by certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to Seller:
IDEXX Laboratories, Inc.
One IDEXX Drive
Westbrook, Maine 04092
Attention: President, Food and
Environmental Division,
and Office of General Counsel
Fax: 207-856-0347
If to Buyer:
Neogen Corporation
620 Lesher Place
Lansing, Michigan 48912-1595
Attention: James L. Herbert, President
Fax: 517-372-0108
With a copy to:
Richard C. Lowe, Esq.
Fraser Trebilcock Davis & Foster, P.C.
1000 Michigan National Tower
Lansing, Michigan 48933
Fax: 517-482-0887
or to such other address as any party hereto may designate in writing to the
other parties, specifying a change of address for the purpose of this
Agreement.
6.2 Entire Agreement. This Agreement, including the exhibits, the
Disclosure Schedule and the other documents referred to herein, supersedes
any and all oral or written agreements or understandings heretofore made
relating to the subject matter hereof and constitutes the entire agreement of
the parties relating to the subject matter hereof.
6.3 Parties in Interest. All covenants and agreements,
representations and warranties contained in this Agreement made by or on
behalf of any of the parties hereto shall inure to the benefit of the parties
hereto, and their respective successors, assigns, heirs, executors,
administrators and personal representatives, whether so expressed or not.
6.4 No Implied Rights or Remedies. Except as otherwise expressly
provided herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or to give any person, firm or corporation, other
than the parties hereto, any rights or remedies under or by reason of this
Agreement.
6.5 Consequential Damages. Notwithstanding any provision of this
Agreement to the contrary, in no event shall either party be liable to the
other for any special, indirect, incidental or consequential losses or
damages except with respect to a breach of Section 2.25 of this Agreement
(provided, that this exception does not modify any of the limitations set
forth in Section 5.2 of this Agreement).
6.6 Headings. The headings in this Agreement are inserted for
convenience of reference only and shall not be a part of or control or affect
the meaning hereof.
27
6.7 Severability. If any provision of this Agreement shall be
declared void or unenforceable by any judicial or administrative authority,
the validity of any other provision shall not be affected thereby.
6.8 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.9 Governing Law; Venue. This Agreement shall be governed by the
law of the State of Delaware applicable to agreements made and to be
performed wholly within such jurisdiction, without regard to the conflicts of
laws provisions thereof. The parties agree that any action under this
Agreement shall be brought in the court of appropriate jurisdiction in the
State of Delaware. The parties consent to such jurisdiction and waive all
claims of improper venue and forum non conveniens.
6.10 Construction of Agreement. The parties agree that this
Agreement has been jointly drafted and that neither party may assert an
ambiguity in the construction of this Agreement against another party because
the other party allegedly drafted the allegedly ambiguous provision.
6.11 Attorneys Fees. The prevailing party in any litigation
involving this Agreement shall be entitled to recover, in addition to any
other relief obtained, the costs and expenses, including reasonable
attorneys' fees and expenses, incurred by the prevailing party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first written above.
IDEXX LABORATORIES, INC.
By: _____________________________
S. Sam Fratoni,
President, Food and
Environmental Division
NEOGEN CORPORATION
By: _____________________________
James L. Herbert, President
28
Exhibits:
- --------
Exhibit 1.2 Note
Exhibit 1.3(b) Revenue Recognition Policies and Special Procedures
Disclosure Schedules:
- --------------------
Schedule 2.2 Third Party Consents and Notices
Schedule 2.5 Financial Statements
Schedule 2.9 Environmental Matters
Schedule 2.12 Fixed Assets
Schedule 2.13 Customers and Suppliers
Schedule 2.14 Permits
Schedule 2.15 Proprietary Rights
Schedule 2.16 Insurance
Schedule 2.17 Employee Relations
Schedule 2.17A Employee Benefit Plans
Schedule 2.18 Agreements and Documents
Schedule 2.19 Absence of Changes
Schedule 2.20 Litigation
Schedule 2.21 FDA Documents
Schedule 2.23 Warranties and Product Liability
Schedule 4.11 Stratified Accounts Receivable
29
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